* Report German banks face fines also weighs
* Dollar slips versus yen on equity sentiment
* Crude oil falls as geopolitical tensions ease (Adds close of U.S. 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 U.S. earnings season is just getting under way, andestimates have been coming down as they typically do prior tothe release of 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 closed down 117.59points, or 0.69 percent, to 16,906.62. The S&P 500 lost13.94 points, or 0.7 percent, to 1,963.71 and the NasdaqComposite dropped 60.067 points, or 1.35 percent, to4,391.463.
European equity indexes fell for a third consecutive sessionon reports 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 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 to101.55 yen. The euro rose 0.05 percent to $1.3611.
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 $1.30 to settle at $108.94 a barrel and U.S.oil settled down 13 cents at $103.40 a barrel. (Additional reporting by John Geddie in London, Reporting byHerbert Lash; Editing by Meredith Mazzilli and Chizu Nomiyama)
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