* Asia stocks up as strong U.S. earnings offset slowdown
fears
* Euro steadies, all eyes on European stress tests results
* Test results expected at 1600 GMT but could come sooner
* Transparency key for stress test success: analysts
By Vikram S.Subhedar
HONG KONG, July 23 (Reuters) - Asian stocks rose on Friday
as strong earnings from economic bellwethers such as
Caterpillar tempered concerns about a global slowdown, while
the euro steadied ahead of European bank stress test results
later in the day.
European stocks <> were expected to open little
changed as investors awaited the test results. Worries about
the health of the region's banks have driven up funding costs
and weighed on share prices since Greece's debt crisis
triggered fears that the euro zone could unravel.
The euro <EUR=> jumped more than 1 percent against the
dollar on Thursday to around $1.29 and European bank stocks
rose across the board in a sign that investors are starting to
hope the worst is behind the region's financial industry.
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But a lack of details about the terms of the tests and
earlier divisions among European Union members over how much
information will be made public has made investors wonder if
the assessments would be tough or transparent enough.
[]
Buoyed by robust U.S. earnings reports, Asian stocks
outside Japan <.MIAPJ0000PUS> rose 1.6 percent despite wariness
over the European tests. They looked set to post a 2.5 percent
gain on the week, with Asia ex-Japan equity funds seeing strong
inflows.
Japan's Nikkei <> rose 2.6 percent.
"There is obviously the risk that if too many banks pass
and do so with a comfortable margin, the test may be judged as
too easy to have actually been informative about the strength
of the banking system," said Goldman Sachs analyst Nick
Kojucharov wrote in a note.
Ironically, word of a few small failures in fiscally weaker
countries such as Portugal or Spain could actually boost
confidence in the vigorousness of the testing process. The
results are expected around 1600 GMT, though some sources said
they could be released earlier.
Analysts say the most concern is over how the banks'
holdings of European sovereign debt will be treated and whether
the assumed "haircuts" or expected losses on the debt are
stringent enough.
"It is very important that banks demonstrate that they have
nothing to hide," said Nomura analyst Peter Westaway in a note,
adding that the most important advantage of the tests is likely
to be that they will provide enough transparency to allow
analysts to conduct their own stress tests on banks in future.
A positive response to the test results would like spur
investors to return to riskier assets, even though the euro
zone's debt problems will take years to resolve.
However, even if most banks pass the test, analysts
estimate lenders in the region will need to raise as much as 90
billion euros in fresh capital as they recover from the credit
crisis and comply with new regulations, which could blunt any
initial gains.
Major U.S. share indexes rose as much as 2.7 percent
overnight as robust quarterly results from construction and
mining equipment maker Caterpillar <CAT.N>, 3M <MMM.N> and
other U.S. multinationals suggested the global economy may be
on stronger footing than previously thought. []
A string of weak U.S. economic data in recent weeks and
worries that Europe's debt crisis could derail its already
fragile recovery have put heavy pressure on markets, but there
are signs that investors are slowly returning to riskier
assets.
Emerging markets equity funds retained some of their
momentum from the previous week, with Asia ex-Japan Equity
Funds taking in over $800 million for the second week running,
according to data from fund-tracking firm EPFR Global.
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Crude oil futures <CLc1> steadied above $79 a barrel after
jumping to 11-week highs overnight as a potential storm
threatened production in the Gulf of Mexico.
Shanghai copper <SCFc3> also rose, chasing London which
climbed to near two-month peaks, spurred by a weaker dollar and
positive economic data on both sides of the Atlantic.
[]
(Editing by Kim Coghill)
