* Results of European bank stress tests due at 1600 GMT
* Anxiety over tests boosts dollar appeal
* Strong earnings, German data bring some optimism
By Walter Brandimarte and Dominic Lau
NEW YORK/LONDON, July 23 (Reuters) - Anxiety about the
looming results of European bank stress tests pushed the euro
down against the dollar and weighed on global stocks on
Friday.
Oil prices fell and Treasuries trimmed some losses as
investors favored safe-haven assets, on fears that the stress
tests results, even if positive, may not show the true health
of financial institutions.
The tests -- whose results were due to released at 12 p.m.
EDT (1600 GMT) -- were designed to provide a clear picture of
the impact of the Europe's sovereign debt crisis on its
financial institutions. But on Friday regulators said they were
applied only to the bank's trading books, not their banking
books. For details, see [].
"This is a surprise in the sense that the scope of the
stress test is limited to a certain portion of the banks'
risk," said Christian Cooper, senior rates trader at Jefferies
& Co. in New York. "It's going to be a little bit less
insightful or meaningful than the already watered-down
expectations."
Nonetheless, some saw the potential for sharp moves in
financial markets.
"There is definitely the potential for a huge swing in
either direction, followed by an equally enormous reversal as
all of the information is digested." said Dan Cook, a senior
market analyst at IG Markets, in Chicago/
Both U.S. and European stocks managed to edge higher ahead
of the test results. On Wall Street, solid corporate results,
including those of Microsoft <MSFT.O> and Ford <F.N>, helped
push up the S&P 500 and Dow industrials.
In Europe, mining shares were among gainers as copper hit a
two-month high. But financial stocks were mostly lower.
Also bringing some optimism to the market was data showing
German business sentiment jumped in July to its highest level
in three years. 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."
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> advanced 0.3 percent, while the FTSEurofirst
300 <> index of top European shares advanced 0.47
percent.
The three major U.S. stock indexes dipped between positive
and negative territory.
The Dow Jones industrial average <> rose 30.80 points,
or 0.3 percent, to 10,353.10. The Standard & Poor's 500 Index
<.SPX> gained 2.13 points, or 0.19 percent, to 1,095.80. The
Nasdaq Composite Index <> edged up 1.94 points, or 0.09
percent, at 2,247.83.
In Europe, the FTSEurofirst 300 <> index of top
European shares was up 0.49 percent at 1,044.45 points.
The euro <EUR=> was down 0.57 percent against the dollar,
at $1.2814, after rising briefly after the German business
sentiment data.
The anxiety over the stress tests boosted the safe-haven
appeal of the dollar, sending it more than 1 percent higher
against the Swiss franc <CHF=>, to 1.0535 francs. Against the
Japanese yen, the greenback <JPY=> was up 0.58 percent at
87.41.
The dollar also gained against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
up 0.41 percent.
U.S. crude oil <CLc1> prices fell 0.25 percent to $79.10
per barrel, after reaching an 11-week high earlier on the
session, as investors became cautious about the stress tests in
Europe.
Prices of 10-year U.S. Treasury notes <US10YT=RR> were down
5/32, with the yield at 2.9493 percent. Traders said the
uncertainty over the stress tests was curbing a broader
sell-off in the Treasury market.
(Additional reporting by Chuck Mikolajczak, Emily Flitter and
Nick Olivari in New York; Editing by Leslie Adler)
