* 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 stocks gains as well as a
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. [].
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."
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 12.26 points at
the close to 10,537.69.
The Standard & Poor's 500 Index<.SPX> slipped 1.17 points
to 1,113.84 and the Nasdaq Composite Index <> fell 8.18
points to 2,288.25.
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 of its 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 3.6 percent to $40.38, while U.S.-traded shares
of UBS jumped 8.9 percent to $16.50 and Deutsche Bank gained
2.8 percent to $68.06.
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 analysts' 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
contended that the rally's pause was not a bearish sign.
The MSCI world equity index <.MIWD00000PUS> rose 0.19
percent to hit its highest level since May 14. The Thomson
Reuters global stock index <.TRXFLDGLPU> was little changed.
The FTSEurofirst 300 index <> rose 0.5 percent, and
emerging stocks <.MSCIEF> added 0.64 percent, finding positive
territory for the year.
In currency trading, the euro <EUR=> struggled to hold its
gains against the dollar but was trading up 0.07 percent at
$1.3003, after earlier reaching 1.3045.
The dollar gained against a basket of major trading-partner
currencies, with the U.S. Dollar Index <.DXY> rising 0.05
percent at 82.13. Against the Japanese yen, the dollar <JPY=>
rose 1.22 percent to 87.94 yen.
In bonds, U.S. Treasuries suffered amid equity strength but
narrowed losses after the gloomy consumer confidence report.
Benchmark 10-year Treasury note <US10YT=RR> yields rose 0.05
percentage point to 3.05 percent.
A report showed U.S. home prices rose more than expected in
May, but some strength was due to a government tax-credit that
has since expired, economists said.
Risk premiums on some European debt were reduced as only
seven of 91 of the region's 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 commodities, U.S. light sweet crude oil <CLc1> fell
$1.54, or 1.95 percent, to $77.44 per barrel, and spot gold
<XAU=> declined $21.10, or 1.79 percent, to $1160.90 an ounce.
(Additional reporting by Harpreet Bhal and Rodrigo Campos;
Editing by Dan Grebler)
