* Report German banks face fines also weighs
* Dollar slips versus yen on equity sentiment
* Crude oil falls as geopolitical tensions ease (Updates U.S., European markets)
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 earnings season is just getting under way, and estimateshave been coming down as they typically do prior to the releaseof results.
"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.'"
The Dow Jones industrial average fell 122.48 points, or 0.72 percent, to 16,901.73. The S&P 500 lost 14.71points, or 0.74 percent, to 1,962.94 and the Nasdaq Composite dropped 64.56 points, or 1.45 percent, to 4,386.97.
European equity indexes fell for a third consecutive day onreports Germany's largest lenders were negotiating a settlementwith U.S. authorities over their dealings with countriesblacklisted by Washington. The talks follow a huge fine forFrench lender BNP Paribas (Xetra: 887771 - news) .
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 and MSCI'sall-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."
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 0.01 percent to $1.3606.
The 10-year U.S. Treasury note rose 15/32 inprice to yield 2.5612 percent.
Oil prices extended their recent decline as events in Iraqand Ukraine have so far not led to serious disruption in flows.Brent fell $1.25 to $108.99 a barrel and U.S. oil lost 35 cents to $103.18 a barrel. (Additional reporting by John Geddie in London, Reporting byHerbert Lash; Editing by Meredith Mazzilli)
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