World stocks hit a 2-1/2 month high on Tuesday while the euro held near a two-month peak versus the dollar as upbeat results from Swiss bank UBS added to a recent run of strong corporate earnings.
UBS rose 7.2 percent as the bank said strong equities and currency revenues drove second-quarter net profit well above forecasts.
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.
Strong corporate performance for the second quarter has eased recent concerns the global economy might slow down toward the end of the year as fiscal stimulus runs out and austerity programs hit consumer spending.
Expectations are rising for earnings. Companies are guiding full-year forecasts up in spite of concerns about a loss of recovery momentum ... and that is helping to keep these markets reasonably firm, said Mike Lenhoff, chief strategist at Brewin Dolphin.
MSCI world equity index <.MIWD00000PUS> rose 0.3 percent to hit its highest level since mid-May. The Thomson Reuters global stock index <.TRXFLDGLPU> gained 0.2 percent.
The FTSEurofirst 300 index <.FTEU3> rose 0.6 percent while emerging stocks <.MSCIEF> added two thirds of a percent to come into positive territory for the year for the first time in 2-1/2 months.
U.S. crude oil fell 0.1 percent to $78.90 a barrel as forecasts showed falling crude inventories and rising refined product stocks in the United States, continuing a trend that has helped keep prices in a $10 range for almost two months.
The German bund futures lost 21 ticks.
The premium that investors demand to hold 10-year Spanish and Irish government bonds rather than euro zone benchmark German Bunds, fell to multi-week lows as investors switched into higher yielding issues.
The health check-up on Europe's 91 banks announced late last week showed only seven of them failed -- 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.
The dollar <.DXY> was steady against a basket of major currencies while the euro also was unchanged at $1.2987, within half a cent of a two-month peak around $1.3029.
(Additional reporting by Harpreet Bhal)