* World stocks zig-zag ahead of US corporate earnings
* Caution ahead of stress test results
* Euro down, yen stabilizes
(Updates with U.S. markets open; changes dateline, previous,
London and byline)
By Manuela Badawy and Natsuko Waki
NEW YORK/LONDON, July 12 (Reuters) - World stocks eased on
Monday while the euro fell broadly as investors grew cautious
ahead of a slew of key U.S. corporate earnings and details of
tests on European banks' financial health.
While second-quarter earnings are expected to come in
strong, investors remained concerned about Europe's fiscal
issues and the health of its financial sector ahead of the
"stress tests" on the continent's banks.
U.S. investors are focused on Alcoa Inc's <AA.N> results
released after the market closes, marking the unofficial start
of earnings season.
While Alcoa, the first Dow component to report earnings, is
expected to swing to a profit in its second quarter, analysts
have been cutting their estimates for the firm due to falling
aluminum prices.
"The focus is on Alcoa and earnings, and there's a little
bit of anxiety, especially since we're coming off such a strong
week," said Peter Cardillo, chief market analyst at Avalon
Partners in New York.
"The European tests and prospects for financial regulation
here are also weighing on things a bit."
The Dow Jones industrial average <> was down 17.94
points, or 0.18 percent, at 10,180.09. The Standard & Poor's
500 Index <.SPX> was down 3.22 points, or 0.30 percent, at
1,074.74. The Nasdaq Composite Index <> was down 2.40
points, or 0.11 percent, at 2,194.05, following its best week
in a year
This week's key earnings include Alcoa <AA.N>, Intel
<INTC.O>, JP Morgan <JPM.N>, Google <GOOG.O>, Bank of America
<BAC.N>, GE <GE.N> and Citi <C.N>.
The MSCI world equity index <.MIWD00000PUS> moved lower,
down 0.3 pct to 280.42. The Thomson Reuters global stock index
<.TRXFLDGLPU> also turned negative.
The FTSEurofirst 300 index <> rose 0.73 percent with
BP <BP.L> surging as traders pointed to a "squeeze" and on
optimism it can sell assets and make progress containing an oil
spill in the Gulf of Mexico.
Thomson Reuters data shows earnings of S&P 500 firms are
expected to grow 27 percent in the second quarter from the
previous three months, after expanding at a rate of 58.3
percent in the January-March period.
So far, with 26 of 500 firms already reported, 69 percent
of earnings came in above expectations.
EURO STUMBLES
The euro fell 0.41 percent to $1.2582 <EUR=>, pulling away
from last week's two-month high as concerns about the
effectiveness of stress tests on European banks prompted
investors to trim long positions in the single currency.
The stress tests are being performed on 91 European banks
with results due on July 23, a major step as the European Union
seeks to restore confidence in the sector. []
"In the near term, the euro could suffer from any
disappointment triggered by the stress tests," said Gareth
Berry, a currency strategist at UBS AG.
The yen briefly slipped after Japan's ruling coalition lost
its upper house majority in Sunday's election, putting the
government's policies to deal with the country's massive debt
at risk. []
U.S. Treasuries were little changed ahead of the first of
this week's $69 billion worth of bond auctions. The Treasury
will auction $35 billion of three-year notes at 1 p.m. (1700
GMT), the first of three sales which also include 10-year notes
and 30-year bonds.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
3/32, with the yield at 3.0465 percent. The 2-year U.S.
Treasury note <US2YT=RR> was unchanged, with the yield at 0.634
percent. The 30-year U.S. Treasury bond <US30YT=RR> was up
8/32, with the yield at 4.020 percent.
Analysts also are keeping a close watch on the auctions as
the bond market remains relatively expensive after a
three-month rally that has pulled benchmark yields below 3.0
percent from more than 4.0 percent at the start of April.
U.S. crude oil <CLc1> fell 1.87 percent to $74.70 a barrel
ahead of corporate results.
(Additional reporting by Ryan Vlastelica, Vivianne
Rodrigues and Burton Frierson in New York; Editing by Theodore
d'Afflisio)
