U.S., Europe data dims Goldman, Geithner optimism

By Matthew Robinson

NEW YORK (Reuters) - Investment bank Goldman Sachs reported strong profits on Tuesday, but economic signals from the United States and Europe dimmed optimism a global recovery may be close on the horizon.

After U.S. Treasury Secretary Timothy Geithner said the force of the global recession was receding, U.S. retail sales data muted gains in financial markets.

A jump in auto and gasoline sales salvaged an otherwise lackluster June for U.S. retailers, pushing sales up 0.6 percent for the month.

Excluding both autos and gasoline, sales were down 0.2 percent in a fourth consecutive monthly decline, suggesting a sluggish recovery from the worst downturn since the 1930s.

Department stores and restaurants were among the laggards, indicating consumers remained reluctant to resume discretionary spending. Producer prices rose more than expected.

On Wall Street, U.S. stock markets .N closed slightly higher as the report on consumer spending -- which accounts for two-thirds of activity in the world's biggest economy -- dampened enthusiasm from positive corporate results. World stocks on the MSCI rose 1 percent. .MIWD00000PUS

GOLDMAN SHINES

Goldman Sachs Group Inc (GS.N), Wall Street's largest investment bank, reported profits up 33 percent in the second quarter, far exceeding expectations as a strong gain in trading was offset by a one-time charge to repay government loans.

"They're terrific numbers ... I think things are very fragile but they manage to make money in all environments, which is what you're supposed to do," said William Smith, chief executive of Smith Asset Management in New York.

"You're going to see absolutely enormous numbers coming out of the money centers, including Citigroup," he added.

In Saudi Arabia, Geithner earlier said he saw signs of confidence returning to the U.S. financial sector and pledged that the United States would pursue policies that preserve the dollar's value.

"The force of the global recession is receding," he said. "For the first time in several quarters, the IMF and a range of private analysts are starting to revise up their forecasts for growth in the second half of this year and next."

EUROPEAN PESSIMISM

Many officials and investors fear tentative signs of an economic upturn from recent data will prove a short-lived blip, sustained only by the trillions of dollars that governments around the world have poured into economic stimulus.

The Organization for Economic Cooperation and Development said the global financial crisis could end up costing developed countries nearly 30 million jobs from the end of 2007 through 2010.