* MSCI world equity off high to trade flat
* Weak US consumer data offsets strong earnings
By Natsuko Waki and Al Yoon
LONDON/NEW YORK, July 27 (Reuters) - A fall in U.S.
consumer confidence knocked world stocks off a 2-1/2 month high
and sent the euro lower on Tuesday, overshadowing strong
corporate earnings in the United States and Europe.
Markets were supported by global banking supervisors' plans
to scale back proposals to beef up bank capital and liquidity
rules. It was a relief to investors who feared tough rules
would hit the profitability of the financial sector.
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But investors began selling shares after a report showed
U.S. consumer confidence fell in July to its lowest level since
February as worries over the job market persisted.
"It is certainly disappointing, we had some positive data
late last year and early this year and it seems like momentum
has faded a bit," said David Sloan, an economist at 4Cast Ltd.,
in New York. "Clearly the big problem for consumers is jobs."
The data clouded out earnings from firms like Dow component
DuPont and Co <DD.N> which reported second-quarter profit
nearly tripled on strong sales in all five businesses.
Two of Europe's top banks, UBS AG <UBSN.VX><UBS.N> and
Deutsche Bank AG <DBKGn.DE><DB.N>, posted results that
reassured investors following last week's regulatory stress
tests. For details see []
DuPont rose 4.5 percent to $40.85, while U.S.-traded shares
of UBS jumped 7.4 percent to $16.27 and Deutsche Bank gained
3.3 percent to $68.38.
Until the consumer confidence report, corporate performance
in the second quarter had eased concerns that the global
economy might slow into year end as fiscal stimulus runs out
and austerity programs hit consumer spending.
Following the disappointing data, the Dow Jones industrial
average was down 0.15 percent after four consecutive days of
gains, losing 16.12 points to 10,507.31
In other U.S. indexes, the Standard & Poor's 500 Index
<.SPX> edged 2.90 points lower, or 0.26 percent, to 1,112.11
and the Nasdaq Composite Index <> slipped 0.42 percent, to
2,286.82.
However, there were signs corporate profitability could
outshine lingering economic weakness. 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 MSCI world equity index <.MIWD00000PUS> rose 0.02
percent to hit its highest level since June 21. The Thomson
Reuters global stock index <.TRXFLDGLPU> lost 0.1 percent.
The FTSEurofirst 300 index <> rose 0.45 percent, and
emerging stocks <.MSCIEF> added 0.54 percent, finding positive
territory for the year.
In bonds, U.S. Treasuries suffered amid equity strength but
narrowed losses after the gloomy consumer confidence report.
Benchmark 10-year Treasury note yields rose 0.04 percentage
point to 3.04 percent.
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 turned to 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."
In currencies, the dollar rose against a basket of major
trading-partner currencies, with the U.S. Dollar Index <.DXY>
up 0.15 percent at 82.21. The euro <EUR=> declined 0.11 percent
to $1.298, and the dollar rose 0.89 percent to 87.65 yen
<JPY=>.
In commodities, U.S. light sweet crude oil <CLc1> fell 62
cents, or 0.79 percent, to $78.36 per barrel, and spot gold
<XAU=> fell $14.25, or 1.21 percent, to $1167.70.
(Additional reporting by Harpreet Bhal and Rodrigo Campos;
Editing by Andrew Hay)
