* Equities rally on better-than-expected earnings
* U.S. and European economic data generally upbeat
* European bank stress test worries ease, bank stocks up
(Updates with U.S. markets, changes dateline and byline)
By Daniel Bases
NEW YORK, July 22 (Reuters) - Global stocks rose on
Thursday and the euro strengthened, backed by upbeat corporate
results, better-than-expected U.S. housing data, and an
improvement in European manufacturing and services activity.
Expectations before the release of European banks' stress
test results appeared to show an easing of concerns as the
region's bank stocks ranked among the best performers.
The increase in investors' risk appetite prompted some
selling of government bonds, while crude oil gained from a
combination of improving data and a weaker U.S. dollar. Gold
prices rose modestly, briefly edging back above $1,200.
U.S. existing home sales fell less sharply than expected
in June. However the supply of unsold homes rose to the
highest amount in almost a year, the National Association of
Realtors said.
"Existing home sales, while still down, were not down as
much as expected. It's still a horrible number. It's just not
as horrible as what people were looking for. Do you really
view that as good news? Apparently the stock market does,"
said Mary Ann Hurley, vice president of fixed-income trading,
at D.A. Davidson & Co in Seattle.
A gloomy report detailing a bigger-than-expected increase
in new U.S. weekly jobless claims and a drop in a private
research group's index of leading U.S. economic indicators
were overshadowed. []
In New York mid-morning trading, the Dow Jones industrial
average <> rose 215.77 points, or 2.13 percent, to
10,336.30. The Standard & Poor's 500 Index <.SPX> gained 25.01
points, or 2.34 percent, to 1,094.60. The Nasdaq Composite
Index <> climbed 57.23 points, or 2.62 percent, at
2,244.56.
Earnings of UPS, the world's largest package delivery
company, soared 90 percent in the second quarter to $845
million. UPS shares shot up 6.53 percent to $63.93 <UPS.N>.
Caterpillar, the world's largest maker of construction and
mining equipment, reported second-quarter profit of $707
million, or $1.09 a share, which exceeded analysts'
expectations. Caterpillar shares gained 1.88 percent to $68.13
<CAT.N>.
While Caterpillar raised its full-year outlook, citing
sales growth in emerging market mining and energy companies,
the bellwether company and Dow component cited "significant
economic concerns," including the risk of a double-dip
recession in Europe and the United States.
RALLY IN EUROPEAN BANK SHARES
In Europe, the pan-European FTSEurofirst 300 <>
index of top shares rose 2.02 percent to 1,038.62.
European banks' shares advanced, with the sector focused
on the outcome of stress tests on how 91 banks would cope with
another economic slump and losses on government debt in the
wake of the euro-zone sovereign debt crisis.
Shares of Barclays <BARC.L>, HSBC <HSBA.L>, Societe
Generale <SOGN.PA> and Deutsche Bank <DBKGn.DE> were up 2.5
percent and 5.6 percent.
Major listed lenders are expected to pass, while the tests
may show the biggest problems lie with smaller, mainly
unlisted players like Germany's Landesbanks and Spain's cajas.
[]
"There is hope that the stress test will take away a lot
of uncertainty surrounding European banks, but you have to
take into account that the ECB would not publish these results
if it would be a failure overall," said Koen de Leus, aneconomist at KBC Securities.
The MSCI world equity index <.MIWD00000PUS> gained 2
percent and the Thomson Reuters global stock index
<.TRXFLDGLPU> rose 1.9 percent. Tokyo's Nikkei <> fell
for a fifth day, off 0.6 percent.
DOLLAR FEELS THE HEAT
The dollar and U.S. Treasury bond yields came under
pressure on the prospect of further U.S. monetary easing.
Federal Reserve Chairman Ben Bernanke had said on
Wednesday the Fed stood ready to ease monetary policy further
if the budding U.S. economic recovery withers, describing the
outlook as "unusually uncertain."
The U.S. dollar index <.DXY> fell 1.10 percent against a
basket of major trading-partner currencies.
The euro rose 1.26 percent to $1.2917 <EUR=> after a
survey showed the euro zone's private sector surged in July.
European purchasing managers' indexes showed private-
sector business activity accelerated in July, surprising
economists who had expected a slowdown, and indicating third-quarter euro-zone growth of around 0.6 percent to 0.7 percent,
analysts said.
[]
But the greenback clawed back ground against the yen after
the housing data, rising 0.14 percent to 87.18 <JPY=>.
Two-year U.S. Treasury note yields briefly matched a
record low of 0.556 percent <US2YT=RR> hit the previous day,
before rising back to 0.589 percent. The benchmark 10-year
Treasury note fell 18/32 of a point in price, pushing the
yield up to 2.95 percent <US10YT=RR>.
In Europe, Bund futures <FGBLc1> slid to a session low of
128.75, down 16 ticks on the day.
U.S. light sweet crude oil futures <CLc1> rose $2.27, or
nearly 3 percent, to $78.83 per barrel.
Spot gold prices <XAU=> rose $12.30 to $1,197.80 an
ounce.
(Reporting by Daniel Bases; Additional reporting by Wanfeng
Zhou, Harpreet Bhal, Natsuko Waki, Tricia Wright; Editing by
Jan Paschal)
