* Seven of 91 European banks fail stress tests
* Anxiety over tests boosts dollar's appeal
* Offsets optimism spurred by strong earnings, German data
(Updates to show U.S. stock indexes rising after 1720 GMT,
GE's dividend increase, gold falls after 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.
Gold tracked the euro lower, falling below $1,190 an
ounce.
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.
"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.
On Wall Street, U.S. stocks scored solid gains in early
Friday afternoon trading, following Dow component General
Electric's announcement of a dividend increase and the
European banks' stress tests. Initially, the three U.S. stock
indexes were mixed -- Dow up a touch while the S&P 500 and the
Nasdaq were down slightly -- right after the stress test
results were released. The stress test results came on the
heels of solid earnings from major U.S. companies, including
Microsoft and Ford.
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 inched higher.
World stocks measured by the MSCI All-Country World Index
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 1733 GMT, the Dow Jones industrial average <> shot
up 84.61 points, or 0.82 percent, to 10,406.91 -- just about
22 points below its 2009 close.
The Standard & Poor's 500 Index <.SPX> was up 7.11 points,
or 0.65 percent, to 1,100.78 -- within about 15 points of
being at the break-even point for the year. The Nasdaq
Composite Index <> rose 16.17 points, or 0.72 percent, to
2,262.96 -- just about 7 points below where it ended 2009.
On Friday, General Electric Co <GE.N> moved to raise its
dividend by 20 percent in a sign that the largest U.S.
conglomerate has put the worst of the financial crisis behind
it. Shares of GE, a Dow component, jumped 3 percent to
$15.66.
The euro 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 to 87.26.
The dollar also gained against a basket of major
trading-partner currencies, with the U.S. Dollar Index up 0.19
percent at 82.755.
U.S. crude oil futures 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 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.
U.S. August gold futures <GCQ0> fell $6.50 to $1,189.20 an
ounce following the stress test results.
(Additional reporting by Chuck Mikolajczak, Emily Flitter
and Nick Olivari in New York; Editing by Jan Paschal)
