* MSCI world equity index up 0.4 pct at 291.79
* UBS leads European gains after strong results
* Euro near two-month peak vs dollar
By Natsuko Waki
LONDON, July 27 (Reuters) - World stocks hit a 2-1/2 month
high on Tuesday while the euro held near a two-month peak versus
the dollar as upbeat results from Swiss bank UBS <UBSN.VX> added
to a recent run of strong corporate earnings.
Global banking supervisors' plans to scale back proposals to
beef up bank capital and liquidity rules also came as a relief
to investors who had feared tough rules would hit the
profitability of the financial sector.
UBS rose more than 9 percent after saying strong equities
and currency revenues drove its second-quarter net profit well
above forecasts. []
In the United States, 78 percent of the 175 companies in the
benchmark S&P 500 index <.SPX> have reported earnings above
analyst expectations, according to Thomson Reuters data.
The strong corporate performance in the second quarter has
eased concerns that the global economy might slow down towards
the end of the year as fiscal stimulus runs out and austerity
programmes hit consumer spending.
"Expectations are rising for earnings. Companies are guiding
full-year forecasts up in spite of concerns about a loss of
recovery momentum ... and that is helping to keep these markets
reasonably firm," said Mike Lenhoff, chief strategist at Brewin
Dolphin.
MSCI world equity index <.MIWD00000PUS> rose 0.5 percent to
hit its highest level since mid-May. The Thomson Reuters global
stock index <.TRXFLDGLPU> gained 0.3 percent.
The FTSEurofirst 300 index <> rose 0.7 percent. Banks
were top gainers, rising 4 percent <.SX7P>.
U.S. stock futures rose half a percent <SPc1>, pointing to a
firmer start on Wall Street later.
Emerging stocks <.MSCIEF> added 0.7 percent to come into
positive territory for the year for the first time in 2-1/2
months.
The Basel Committee said it would scale back many of its
proposals to beef up bank capital and liquidity rules,
signalling concessions in the face of lobbying by banks and
governments. []
The committee published a draft Basel III reform in December
that would force banks to hold more and better quality capital
to withstand future shocks without taxpayer help again.
U.S. crude oil <CLc1> erased early losses to rise 0.1
percent on the day to $79.07.
German bund futures <FGBLc1> were steady on the day.
The premium that investors demand to hold 10-year Spanish
<ES10YT=TWEB> and Irish government bonds <IE10YT=TWEB> rather
than euro zone benchmark German Bunds <DEU10YT=TWEB> fell to
multi-week lows as investors switched into higher yielding
issues.
Only seven of 91 European banks failed health-check tests on
their financial standing announced late last week -- five small
Spanish banks, Germany's state-rescued Hypo Real Estate and
Greece's ATEbank. No listed bank failed the tests.
"As expected, the transparency has helped, with peripheral
yield spreads versus Germany moving lower," Barclays Capital
said in a note to clients.
"It is interesting to note that this narrowing has been the
most pronounced for Spain, the country with the largest number
of 'failed' banks. We feel it is precisely this transparency
that has helped the narrowing of the yield spreads."
The dollar <.DXY> was steady against a basket of major
currencies, while the euro rose 0.1 percent to $1.3000 <EUR=>,
within half a cent of a two-month peak around $1.3029.
(Additional reporting by Harpreet Bhal; Editing by Hugh Lawson)
