RPT-GLOBAL MARKETS-Asian shares, euro rise after stress tests

                                
 * Asia shares up 0.4 pct, euro extends rally after bank
tests
                                
 * Investors sceptical over the tests' credibility
                                
 * Players awaiting European market reaction to stress tests
                                
 * Strong U.S. earnings, surprising Europe data buoy
markets
  (Repeats to more subscribers)
                                
 By Kazunori Takada
                                
 SINGAPORE, July 26 (Reuters) - Asian shares rose and the
euro extended gains on Monday as solid U.S. corporate earnings
and surprisingly strong euro zone data offset growing
scepticism that stress tests on European banks were not strict
enough.
                                
 Only seven of 91 banks -- five small Spanish banks,
Germany's state-rescued Hypo Real Estate [HRXGe.UL] and
Greece's ATEbank <AGBr.AT> -- failed the tests, for an overall
capital shortfall of $3.5 billion euros.
                                
 The shortfall was much smaller than the 30-100 billion
euros predicted by markets, although many European banks have
already raised capital during the financial crisis.
[ID:nLDE66M1T3] [ID:nLDE66M1A2]
                                
 The euro <EUR=> gained 0.2 percent in early Asian trade,
after rising on Friday as the bank tests showed no nasty
surprises and on strong euro zone data, including a record jump
in German business sentiment in July. [ID:nLDE66M0NL]
                                
 "With the results of the stress tests, which had been the
market's big focus, out in the open, downward factors seem to
have run their course for now, even though there's criticism
that those tests might have been too easy," said Hiroichi
Nishi, general manager of equity marketing at Nikko Cordial
Securities.
                                
 "The market will likely rise initially and then move
narrowly awaiting reaction in Europe with market players
keeping an eye on currency moves."
                                
 Asian stocks outside Japan <.MIAPJ0000PUS> rose 0.4
percent, after rising 1.5 percent on Friday on optimism over
U.S. company earnings.
                                
 Japan's Nikkei <.N225> outperformed its regional peers,
gaining 1.2 percent and extending a 2.3 percent rally in the
previous session. Investors were shifting to focus to a slew of
corporate results from major Japanese exporters such as Sony
<6758.T> and Honda <7267.T> later in the week this week.
                                
 South Korea's benchmark KOSPI <.KS11> firmed 0.4 percent
following stronger-than-expected seocnd-quarter growth data
while Hong Kong's Hang Seng <.HSI> rose 0.3 percent.
[ID:nTOE66P006]
                                
 U.S. stocks rose about 1 percent on Friday as GE <GE.N>
shares jumped after the conglomerate increased its quarterly
dividend by 20 percent, the latest in a string of bullish news
from big U.S. multinationals which have helped ease concerns
that the global economic recovery may be stalling. [.N]
                                
 While most economists rule out a slide back into recession,
data shows U.S. growth is definitely cooling, even as parts of
Europe show sparks of life and Asian economies roar ahead.
                                
 Economists polled by Reuters think U.S. growth slowed to a
2.5 percent annual rate in the second quarter, down from 2.7
percent in the first quarter. The GDP data, to be released on
Friday, is also expected to show much of the U.S. growth
continued to be reliant on government spending amid weakening
consumer confidence.
                                
 EURO UP BUT DOUBTS REMAIN
                                
 Reflecting investor caution towards risk taking amid doubts
about the credibility of the stress tests, the Australian
<AUD=> and New Zealand dollars <NZD=> steadied after rallying
on Friday.     Investors are awaiting to see how European
markets will react to the test results, which were announced
after they had closed, although the outcome was unlikely to
provide players with a clear sense of direction.
                                
 Banks were tested on how well they could withstand another
recession in the next two years and some losses on their
government bond holdings. They failed if their Tier 1 capital
ratio dropped below 6 percent. [ID:nLDE66M1T3]
                                
 But analysts said the assessments were not tough enough and
questions remained over the true health of the sector.
                                
 "The tests did not assume a sovereign default and included
haircuts on sovereign debt only for the component held on
trading books, which represents a small majority of overall
holdings," analysts at Credit Agricole CIB said in a note to
clients.
                                
 Spot gold <XAU=> rose $1.60 to $1,190.65 an ounce while
crude oil futures <CLc1> inched above $79 a barrel as Tropical
Storm Bonnie dissipated into a low-pressure system and avoided
oil and gas operations in the eastern Gulf of Mexico.
 (Additional reporting by Aiko Hayahi; Editing by Kim Coghill)