GLOBAL MARKETS-Banking worries hit world stocks

                                
 * World stocks down on credit worries
                                
 * Wall Street set for poor start
                                
 * Europe down 1 percent, Japan down 2.39 percent
                                
 * Euro off one month low versus dollar
                                
 
                                
 By Jeremy Gaunt, European Investment Correspondent
                                
 LONDON, April 21 (Reuters) - World stocks sold off on
Tuesday and Wall Street looked set to open lower after a more
than one-month long rally lost some of its immediate fiz due to
renewed worries about the state of the banking industry.
                                
 Shares fell despite growing signs of confidence among German
investors and solid earnings from Tesco, one of the world's
largest retailers. Global stocks, as measured by MSCI
<.MIWD00000PUS>, were down 0.7 percent, adding to a more than 3
percent loss on Monday.
                                
 European equities seesawed but, with Wall Street's opening
looming, settled lower. The FTSEurofirst index <.FTEU3> was down
1 percent, particularly as Bank of New York Mellon <BK.N>
reported its first quarter profits had fallen by half.
                                
 Concern about banks partly drove sentiment. On Monday Bank
of America greatly increased its reserves for non-performing
assets, raising uncertainties about future writedowns at a time
when investors are already worried about the outcomes of stress
tests on the U.S. banking industry.
                                
 The European banking sector leading the market down. Monday
and Tuesday's losses raised concern among some people that the
sharp rally in global stocks since early March was about to end.
                                
 "There are still questions about banks' earnings and
provisions," said Bernard McAlinden, strategist at NCB
Stockbrokers. "The market is likely to give back some more of
its gains. It's as positive as you can be to say that we've seen
the lows."
                                
 Before this week, world stocks had risen for six weeks in a
row, gaining close
                                
 
                                
 to 30 percent.
Upside surprises have continued. The ZEW German analyst and
investor sentiment index moved into positive territory for the
first time since July 2007.
                                
 British supermarket giant Tesco, the world's third largest
retailer, showed its resilience to the economic downturn,
posting a 10 percent rise in underlying annual profit to 3.1
billion pounds ($4.6 billion) [ID:nLL127432]
                                
 Earlier, Japan's Nikkei <.N225> closed down 2.39 percent.

                                
 EURO RECOVERS
                                
 The euro rose after hitting one-month lows against the
dollar and yen as investors took profits, but gains were limited
as investors remained wary of more corporate earnings results
and the health of banks.
                                
 The euro was up 0.1 percent against the dollar at $1.2936
<EUR=>, but was not far from a one-month low of $1.2888 hit on
EBS on Monday. It was up 0.4 percent at 126.96 yen <EURJPY=R>.
                                
 Two-year euro zone government bond yields <EU2YT=RR> were 4
basis points lower at 1.408 percent and 10-year yields
<EU10YT=RR> were down 2 basis points at 3.124 percent.
                                
 "The bank earnings aren't as good as some of the headline
figures might suggest," said a trader.
                                
 
                                
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 (Editing by David Stamp)