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. [ID:nLDE66Q0ON]. 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 [ID:nN26201739] 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 .IXIC 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 .FTEU3 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.

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