* MSCI world equity index retreats from 12-month high
* Dollar gains as confidence ebbs
* Results from Bank of America, General Electric disappoint
By Simon Falush
LONDON, Oct 16 (Reuters) - World stocks fell and the euro retreated against the dollar on Friday as optimism about the third-quarter corporate earnings season faded after weak results from General Electric and Bank of America.
General Electric reported a 42 percent drop in profit and Bank of America posted a quarterly loss, dulling risk appetite which had been whetted by strong JPMorgan results earlier in the week.
European shares and U.S. stock futures turned negative while U.S. Treasury note futures hit session highs as the results disappointed investors after expectations were set high by JP Morgan posting strong results on Wednesday.
The dollar index, which tends to rise as risk appetite dips, rose.
"JPMorgan set the hurdle rate very high, and at the margin it's difficult for the banks - you saw it with Goldmans yesterday - to now come in and have the same type of positive reaction," said Philip Lawlor, chief portfolio strategist at Nomura.
Oil retreated to around $77 per barrel, snapping a seven-day winning streak as the demand outlook dimmed slightly while metal prices also fell, hurting mining stocks.
However, while the MSCI world equity index was down 0.5 percent on the day, stocks are not far below 12 month highs set the previous session and investors remain relatively upbeat overall about the earnings season.
Google, IBM and Goldman Sachs results continued a trend of beating analysts' forecasts, helping European stocks gain 0.7 percent in early trade and touch their highest level since early October 2008.
Through Thursday, Thomson Reuters Proprietary Research shows that of around 10 percent of S&P 500 index companies that have reported, 82 percent have beaten expectations.
The global equity index is up 73 percent since touching a six year trough in March, although still 7 percent below its level before Lehman Brothers collapsed last September.
GREENBACK RETREATS
"There's been a decent move (down) over the week (for the dollar) and ahead of the weekend you have to ask yourself are they (investors) going to push it much more? Unlikely," said Paul Mackel, senior currency strategist at HSBC in London.
"Equities are looking a bit shaky and it's the end of the week. So put the two together and the dollar is biased to the upside," he said.
The euro was down 0.5 percent at $1.4871, while the greenback was 0.7 percent firmer at 91.21 yen.
Sterling continued its recovery after comments from policymaker member Paul Fisher prompted speculation that the Bank of England would not extend quantitative easing. (Additional reporting by Tricia Wright and Jamie McGeever; Editing by Ruth Pitchford)