GLOBAL MARKETS-Stock indexes flat as Portugal fears ease; oil down sharply

(Adds details, updates prices)

By Caroline Valetkevitch

NEW YORK, July 11 (Reuters) - Major global equities markets steadied and the yen stabilized against the U.S. dollar on Friday as worries about Portugal's biggest bank ebbed, while oil prices dropped on easing concern about supply losses in the Middle East.

MSCI (NYSE: MSCI - news) 's All-World Index, however, was still down 1.6 percent for the week, while the Standard & Poor's 500 index was on track for its worst week since April.

Early U.S. earnings reports sparked some caution for U.S. stock investors, with Well Fargo's shares down 1.2 percent after the bank for the first time since 2009 did not increase its earnings-per-share from the preceding quarter.

Portugal's PSI 20 index was up 0.7 percent after the country's largest bank, Banco Espirito Santo, said late on Thursday that loan losses that hit its founding family would not put the bank at risk of running short of capital.

Shares (Frankfurt: DI6.F - news) in Portugal's largest listed lender are down 35 percent so far this week, its worst week on record.

The calmer market enabled Italy to sell 7.5 billion euros of bonds, the top of its targeted range, in an auction that sharply contrasted with Greece's three-year bond sale on Thursday, in which demand was hurt by fallout from Portugal.

"The systemic risk to the Portuguese banking system is limited, and that's what the market is telling you this morning," said Veronika Pechlaner, who helps manage $13 billion of assets at Ashburton Investments.

The Dow Jones industrial average was down 32.73 points, or 0.19 percent, at 16,882.34. The Standard & Poor's 500 Index was down 2.58 points, or 0.13 percent, at 1,962.10. The Nasdaq Composite Index was up 4.36 points, or 0.10 percent, at 4,400.57. The S&P 500 was on track for a 1.1 percent decline for the week.

"Wells came in a little light, and while there was nothing really wrong with the quarter, it is one of the few banks that can be counted on to beat profit expectations and that didn't happen," said Matthew Kaufler, portfolio manager at Federated Investors in Rochester, New York.

The MSCI World index was down 0.1 percent, while the pan-European FTSEurofirst 300 index closed up 0.01 percent.

Currency markets were largely steady, with the yen trading against the dollar at 101.33. It rose 0.12 percent to 137.72 against the euro.

The dollar was little changed against the euro at $1.3593.

U.S. Treasury bond prices edged higher on safe-haven demand stemming partly from lingering worries about Portugal. Appetite for Treasuries was also stoked by the minutes of the U.S. Federal Reserve's June policy meeting released on Wednesday, which hinted that the central bank is likely to cling to its near-zero interest rate policy until the second half of 2015.

Benchmark 10-year Treasuries were up 6/32 in price to yield 2.511 percent.

As tensions in the Middle East showed little sign of abating, Brent crude oil was off $1.68 at $106.99 a barrel. U.S. crude lost $1.59 to $101.34.

(Additional reporting by Lionel Laurent, Patrick Graham, Emelia Sithole-Matarise, Chris Vellacott and Tricia Wright in London,; and Ryan Vlastelica in New York; Editing by Larry King and Dan Grebler)