* Report German banks face fines also weighs
* Dollar slips versus yen on equity sentiment
* Crude oil falls as geopolitical tensions ease (Adds opening of U.S. markets, changes byline, dateline;previous LONDON)
By Herbert Lash
NEW YORK, July 8 (Reuters) - The dollar eased and globalequity markets fell on Tuesday as investors stepped back aheadof second-quarter earnings reports and after successive recordhighs last week for several major stock indices.
Media reports of new U.S. fines for banks and dimmingprospects that the European Central Bank will launch an asset-purchase program weighed on sentiment in Europe, as did Germanimports and exports that dropped more than expected in May.
The dollar fell against the Japanese yen as long-datedTreasuries yields dropped for a second day, with investors waryof riskier assets as the U.S. earnings season began.
Safety buying of long-dated Treasuries is seen limitingdollar strength, at least in the near term. Three straight daysof record closing highs for the S&P 500, the Dow industrials andMSCI (NYSE: MSCI - news) 's all-country world index tamped down investor enthusiasm.
"We've seen a bit of risk aversion in the market and thetendency for yields to fall in the U.S. and the dollar to fallin sync with it," said Sebastien Galy, senior foreign exchangeanalyst at Societe Generale (Paris: FR0000130809 - news) in New York. "It's driven byequities."
MSCI's ACWI fell 0.6 percent to 429.22,while the pan-European FTSEurofirst 300 index was down1.0 percent at 1,368.08 points
The Dow Jones industrial average fell 112.03 points,or 0.66 percent, to 16,912.18. The S&P 500 lost 13.57points, or 0.69 percent, to 1,964.08 and the Nasdaq Composite dropped 63.206 points, or 1.42 percent, to 4,388.324.
"It's all about earnings," Brad McMillan, chief investmentofficer for Commonwealth Financial in Waltham, Massachusettssaid. "It's just people pulling back, pulling their heads in alittle bit and saying 'Wait a minute, maybe we got a littleahead of ourselves, let's see what the news actually says.'"
European equity indexes fell for a third consecutive dayafter reports that Germany's largest lenders were negotiating asettlement with U.S. authorities over their dealings withcountries blacklisted by Washington. The talks follow a hugefine for French lender BNP Paribas (Xetra: 887771 - news) .
The ECB has made unprecedented policy moves in recent monthsto stimulate bank lending and revive the euro zone economy.
But late on Monday ECB Executive Board member SabineLautenschlaeger showed the strength of opposition in somequarters to a program of asset purchases, which she said shouldbe a last resort.
The dollar fell 0.27 percent against the yen to101.54 yen. The euro rose 0.05 percent to $1.3611.
The 10-year U.S. Treasury note rose 13/32 inprice to yield 2.5684 percent.
Oil prices extended their recent decline as events in Iraqand Ukraine have so far not led to serious disruption in flows.Brent dipped 96 cents to $109.28 a barrel and U.S. oil lost 1 cent to $103.52 a barrel. (Additional reporting by John Geddie in London, Reporting byHerbert Lash; Editing by Meredith Mazzilli)
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