* MSCI world equity clings to 2-1/2 month high
* Weak US consumer data offsets strong earnings
* Euro regains bid as equities shed losses
By Al Yoon
NEW YORK, July 27 (Reuters) - World stocks reached 2-1/2
month highs on Tuesday on strong corporate earnings, but weak
U.S. consumer confidence limited gains and interrupted a brief
rally by the euro against the dollar.
Equity markets were also 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. [].
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 the economic outlook, which was supported
on Tuesday by 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>, also 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.
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. The Dow Jones industrial average struggled to make
its fourth consecutive winning session, rising 9 points at
midday in New York to 10,535.
In other U.S. indexes, the Standard & Poor's 500 Index
<.SPX> slipped to 1,112. The Nasdaq Composite Index <>
fell to 2,286.
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.
"It has taken investors a bit to catch on to the sentiment
that earnings are in fact pretty good," said Bruce Zaro, chief
technical strategist at Delta Global Advisors in Boston, who
added that the rally's pause was not a bearish sign.
The MSCI world equity index <.MIWD00000PUS> rose 0.26
percent to hit its highest level since May 14. The Thomson
Reuters global stock index <.TRXFLDGLPU> gained 0.1 percent.
The FTSEurofirst 300 index <> rose 0.5 percent, and
emerging stocks <.MSCIEF> added 0.64 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 0.06 percentage
point to 3.06 percent.
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 euro <EUR=> struggled to hold its gains
against the dollar but was trading at $1.29 after reaching
$1.30.
The dollar gained against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> rising 0.07
percent at 82.141. Against the Japanese yen, the dollar <JPY=>
rose 1.13 percent to 87.86 yen.
In commodities, U.S. light sweet crude oil <CLc1> fell
$1.18, or 1.49 percent, to $77.80 per barrel, and spot gold
declined <XAU=> $20.90, or 1.77 percent, to $1161.10.
(Additional reporting by Harpreet Bhal and Rodrigo Campos;
Editing by Kenneth Barry)
