* Seven of 91 European banks fail stress tests
* Anxiety over tests boosts dollar's appeal
* Offsets optimism spurred by strong earnings, German data
(Updates with European markets' close, banks stress tests)
By Walter Brandimarte
NEW YORK, July 23 (Reuters) - Global stocks rose on Friday
as fewer-than-expected European banks failed stress tests, but
the euro fell as analysts questioned the tests' credibility.
Seven out of 91 European banks failed tests imposed by
regulators, showing an overall capital shortfall of 3.5
billion euros under the worst scenario. For details, see
[].
"The market expectation was that you were going to have
about 10 bank failures -- two from Germany, one from Greece
and about six from Spain -- and capital shortfalls totaling at
least 100 billion euros," said Cary Leahey, an economist at
Decision Economics in New York.
A larger number of failures, Leahey added, would have
added credibility to the tests.
The tests, released after European markets closed, were
designed to provide a clear picture of the impact of Europe's
sovereign debt crisis on its financial institutions.
But regulators said on Friday the stress tests were
applied only to the banks' trading books -- not their banking
books. For details, see [].
On Wall Street, U.S. stocks were flat after the results,
with the Dow industrials up slightly while the S&P 500 was
down just a fraction of a point and the Nasdaq was slightly
lower. The European banks' stress test results came on the
heels of solid earnings from major U.S. companies, including
Microsoft <MSFT.O> and Ford <F.N>.
In Europe, the market closed higher before the results of
the tests were released. Mining shares ranked among the
gainers as copper hit a two-month high. The STOXX Europe 600
Banking Index <.SX7P> inched higher.
World stocks measured by the MSCI All-Country World Index
<.MIWD00000PUS> advanced 0.29 percent, while the FTSEurofirst
300 <> index of top European shares advanced 0.48
percent to end at 1,044.31.
The three major U.S. stock indexes had fluctuated between
positive and negative territory most of the morning.
At midday, the Dow Jones industrial average <> edged
up 8.32 points, or 0.08 percent, to 10,330.62. But the
Standard & Poor's 500 Index <.SPX> dipped 1.27 points, or 0.12
percent, to 1,092.40. The Nasdaq Composite Index <>
slipped 6.76 points, or 0.30 percent, to 2,239.13.
The euro <EUR=> was down 0.52 percent against the dollar,
at $1.2821, after rising briefly after data showed German
business sentiment jumped in July to its highest level in
three years.
The anxiety over the stress tests boosted the dollar's
safe-haven appeal, driving it up 0.40 percent against the
Japanese yen <JPY=>, to 87.26.
The dollar also gained against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
up 0.19 percent at 82.755..
U.S. crude oil futures <CLc1> fell 64 cents, or 0.80
percent, to $78.66 per barrel following the stress test
results. Earlier, U.S. oil futures reached an 11-week high at
$79.60.
The 10-year U.S. Treasury note <US10YT=RR> declined 3/32
in price, with the yield at 2.953 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 Jan Paschal)
