GLOBAL MARKETS-Euro rises, Asian shares up after stress tests

                                
   * Euro extends gains after tests, Asia stocks up 0.5 pct
                                
 * European stock markets seen up as much as 1 pct
                                
 * Investors sceptical over the tests' credibility
                                
 * Strong U.S. earnings, surprising Europe data buoy markets
                                
 By Kazunori Takada
                                
 SINGAPORE, July 26 (Reuters) - The euro edged up and Asian
shares rose 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.
                                
 The upbeat sentiment was expected to carry over to European
markets, with Britain's FTSE 100 <.FTSE>, Germany's DAX
<.GDAXI> and France's CAC-40 <.FCHI> seen opening up to 1
percent higher in their first reaction to the bank test
results, which were released after European markets closed on
Friday. [ID:nLDE66P01M]
                                
 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 ($4.5 billion).
                                
 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=> inched up 0.2 percent against the U.S.
dollar in Asian trade to around $1.2944, before paring some of
its gains.
                                
 It had risen by a similar margin on Friday as the bank
tests revealed no nasty surprises. The single currency was also
buoyed by strong European data, including a record jump in
German business sentiment in July and a stronger-than-expected
surge in the British economy. [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 0.5
percent, after advancing 1.5 percent on Friday on optimism over
U.S. company earnings.
                                
 Japan's Nikkei <.N225> outperformed, unofficially closing
0.8 percent higher 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 0.6 percent
following stronger-than-expected second-quarter growth data
while Hong Kong's Hang Seng <.HSI> rose 0.2 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.
                                
 DOUBTS REMAIN
                                
 Reflecting investor caution towards risk taking amid doubts
about the credibility of the stress tests, the Australia <AUD=>
dollar dipped and the New Zealand dollar <NZD=> steadied after
rallying on Friday.
                                
 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 0.3 percent to $1,192.75 an ounce
while crude oil futures <CLc1> hovered near $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)