World stocks eased off a 18-1/2 month high on Tuesday ahead of key corporate earnings, while the yen dipped after lawmakers from Japan's ruling party said it should fall to around 120 per dollar.

The euro ticked higher against the dollar, hanging on to most of Monday's gains reached after the euro zone reached a deal on a rescue package for debt-laden Greece. Doubts over how the package would be activated prevented the single currency from rising further.

Investors were also eyeing the outcome of a Greek treasury bill auction due on Tuesday to assess the extent of demand for the country's debt.

After the U.S. market close on Monday, Alcoa kicked off the earnings season, reporting results that matched Wall Street estimates. Other major U.S. companies to report results this week include JP Morgan , Google , Bank of America and General Electric .

Asian stocks fell 0.7 percent on earnings nervousness.

Asian markets were lower and we are waiting for more earnings releases, said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt.

I think we have run too far too fast. We have been at high levels so we have to be careful and wait and see. The MSCI world equity index fell 0.2 percent, after reaching its highest level since September 2008 on Monday.

According to Thomson Reuters data, firms on the S&P 500 index are expected to report a 37.1 percent rise in quarterly earnings growth. Double-digit growth is expected to extend till the first quarter of 2011.

The FTSEurofirst 300 index <.FTEU3> fell 0.1 percent while emerging stocks <.MSCIEF> lost half a percent.

U.S. crude oil fell 0.4 percent to $83.97 a barrel.

The yen fell as low as 93.42 per dollar, quickly erasing earlier gains to stand steady on the day, after a group of lawmakers from Japan's ruling party said efforts should be made to maintain appropriate currency levels of around 120 yen per dollar.

The draft proposal also called for the government and the Bank of Japan to use all monetary and fiscal policy tools available to erase deflation.

The euro was up 0.1 percent at $1.3595 while German bund futures were steady.

Athens will sell 1.2 billion euros of treasury bills this session, testing market appetite two days after euro zone members agreed to the 30 billion euro aid package.

Even if a Greek default is prevented, the euro is likely to be at a yield disadvantage once the Federal Reserve normalizes its key rates we to the situation in the peripherals, Commerzbank said in a note to clients.

This is an argument against an excessively strong euro/dollar exchange rate.

The dollar <.DXY> was steady against a basket of major currencies.

(editing by John Stonestreet)

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