* Euro rises after record Ifo data for July
* Hit earlier by report some Spanish banks fail stress tests
* Robust U.S. quarterly earnings boost stocks
* Results of European bank stress tests due at 1600 GMT
* For more on the stress tests, click on []
By Dominic Lau
LONDON, July 23 (Reuters) - The euro rose on Friday after a
survey showed German business sentiment posted a record jump in
July to its highest level in three years, and corporate results
lifted stocks ahead of eagerly awaited European bank stress test
results.
The single currency was lower before the Ifo survey, as
Spanish newspaper El Pais reported that several of the country's
18 savings banks had failed the tests, which are due to be
published on Friday afternoon. []
The report from the Munich-based Ifo think tank helped ease
concerns that the global economy could slip back into recession.
"We expected an increase but we didn't expect this. The
German economy is running really strong at the moment," said
Ralph Solveen at Commerzbank.
"Companies are not letting themselves be distracted by all
the negative discussions going on, such as the bank stress
tests, the debt crisis or the threat of a double-dip recession
in the United States."
The euro gained 0.4 percent to $1.2944 <EUR=> and was up 0.6
percent at 112.74 yen <EURJPY=>, while sterling rose 1.2 percent
to $1.5434 after the UK economy grew almost twice as fast as
expected in the second quarter. []
The dollar, meanwhile, slipped 0.3 percent against a basket
of major currencies <.DXY>.
The results of the tests on 91 European banks, which use
scenarios including declines in the value of the sovereign debt
they hold, are due at 1600 GMT.
The European Union cleared Spain and Portugal to extend
state support for their banks until the end of 2010, the latest
move to help institutions weather the crisis. []
"The market's assumption is that several of the Spanish
Cajas (savings banks) will fail, along with some peripheral
European banks. But if it goes beyond that the euro reaction
will be negative," said Adam Cole, head of global fx strategy at
RBC Capital Markets.
Meanwhile, Manfred Weber, the head of the Association of
German Banks, told local radio that he was confident that German
banks "all in all" would perform well in the tests.
Some analysts also consider Germany's quasi-public regional
landesbanks to be at risk.
According to a survey of investors conducted by Goldman
Sachs, 10 out of the 91 banks subjected to the tests were
expected to fail.
The Goldman poll of 376 respondents, including hedge funds
and long-only investors, showed European banks were on average
expected to raise 37.6 billion euros ($48.4 billion) in extra
capital following the tests, it said in a note dated July 22.
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Graphic comparing German IFO and PMIs
http://graphics.thomsonreuters.com/F/07/DE_IFOPMI0710.gif
Graphic showing UK quarterly GDP growth
http://graphics.thomsonreuters.com/F/07/UK_Q2GDP0710.gif
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IFO, EARNINGS HELP
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> advanced 0.5 percent, boosted by a 2.3 percent
rise in Tokyo's Nikkei average <> following robust
quarterly U.S. corporate results.
Microsoft Corp <MSFT.O> easily beat Wall Street forecasts
with a 48 percent rise in quarterly profit.
Europe's FTSEurofirst 300 <> rose 0.2 percent, while
European banks <.SX7P> were down 0.3 percent.
"Corporate earnings have been good, or not as bad as
expected, and that's helping the market up," said Andy Lynch,
fund manager at Schroders. "Most banks will pass the stress
test, but that's no great surprise."
Europe's banking sector carried a one-year forward
price-to-earnings ratio of 9.09, compared with its 10-year
average of 11.09, and a dividend yield of 2.72 percent versus a
10-year average of 3.34 percent, according to Thomson Reuters
DataStream.
U.S stock index futures <SPc1> <DJc1> <NDc1> rose 0.2 to 0.4
percent, indicating a stronger start for Wall Street.
Bund futures <FGBLc1> fell 38 ticks to 128.31 and yields on
10-year benchmark German Bunds <DE10YT=RR> were up 4 basis
points at 2.705 percent.
(Additional reporting by Neal Armstrong, Ian Chua and Brian
Gorman in London, and Dave Graham in Berlin; Editing by Hugh
Lawson)
