World stock gains tempered by US inflation concerns despite strong Goldman Sachs earnings

World stock gains limited by inflation concerns

LONDON — European and U.S. stock markets rose modestly Tuesday after investment bank Goldman Sachs Group Inc. duly delivered strong second-quarter earnings. However, a surprisingly large spike in U.S. wholesale price inflation tempered much of the euphoria.

In Europe, the FTSE 100 index of leading British shares closed up 35.55 points, or 0.9 percent, at 4,237.68 while Germany’s DAX rose 59.35 points, or 1.3 percent, to 4,781.69. The CAC-40 in France was up 29.79 points, or 1 percent, at 3,081.87, with trading volumes reduced significantly because of the Bastille Day national holiday.

In the U.S., stocks seesawed through the session but by midday New York time, the Dow Jones industrial average was up 17.23 points, or 0.2 percent, at 8,348.91 while the broader Standard & Poor’s 500 index rose 3.24 points, or 0.4 percent, to 904.29. Tuesday’s lackluster performance comes a day after U.S. stocks enjoyed sizable gains on hopes about Goldman Sachs’ earnings.

In the event, Goldman Sachs did not disappoint, reporting second quarter earnings of $2.72 billion, or $4.93 per share, after preferred stock dividends, up on last year’s $2.05 billion, or $4.58 per share.

Over the rest of the week, investors will be particularly interested to see if other big U.S. banks, such as Citigroup Inc. and Bank of America Corp. are in similarly good shape.

“This is just one sector and there is still the nagging doubt among many that, once the euphoria has settled down, we are still left with lots of companies struggling day-to-day, and an economy that still shows no real signs of any imminent recovery,” said David Jones, chief market strategist at IG Index.

Among many others, chip maker Intel Corp., Google Inc. and General Electric Co. are due to unveil earnings this week too.

Worries about future inflation were a major reason why Wall Street failed to push on again Tuesday.

The Labor Department revealed that U.S. wholesale prices rose in June by the most since November 2007, largely because of a spike up in energy costs. The 1.8 percent monthly jump in the Producer Price Index, which tracks the costs of goods before they reach store shelves, was double market expectations and fanned fears about inflation.

The rise in energy costs — until the last week or so, oil prices had been on an upward trajectory for a few months on speculation that the world oil demand would rise — also reined in any enthusiasm from the strongest retail sales figures in five months.

Analysts noted that the 0.6 percent monthly rise in June retail sales reported by the Commerce Department was largely due to price-related increases at gasoline stations and higher car prices related to the government’s attempts to prop up the ailing auto industry.

Investors are fully aware that without the support of the U.S. consumer, which accounts for around 70 percent of the U.S. economy and 20 percent of the global economy, any recovery will soon fizzle out.

“It looks as if China bulls, oil-futures-as-an-asset-class delusionists, and their investment-bank panders have neatly cut off the recovery by bidding up oil prices, thus ensuring that they lose money as oil demand flags,” said Charles Dumas, an analyst at Lombard Street research.

Oil prices climbed Tuesday, with the benchmark crude for August delivery up 27 cents to $59.56 a barrel, but still more than $10 a barrel lower than over a week ago.

Earlier in Asia, Japan’s benchmark Nikkei 225 stock average snapped a nine-day losing streak and rose 211.48 points, or 2.3 percent, to 9,261.81, erasing most of the previous day’s decline. Hong Kong’s Hang Seng vaulted 631.10, or 3.7 percent, to 17,885.73.

Elsewhere in Asia, Australia’s key index leapt 3.5 percent, while encouraging economic news propelled Singapore’s main index up 1.9 percent. The island’s export-dependent economy grew for the first time in a year in the second quarter, according to preliminary figures, suggesting the region is emerging from the global slump.

South Korea’s Kospi gained 0.5 percent and China’s Shanghai index was up 2.1 percent.

The dollar was up 0.1 percent at 93.10 yen while the euro fell 0.1 percent to $1.39637.

Analysts said the dollar’s fortunes over the rest of the week could well depend on the performance of stock markets in the wake of the corporate earnings releases.

“If earnings disappoint, as many suspect, the dollar has room to rally on rising risk aversion and falling stock prices,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

“If, however, earnings exceed expectations, the dollar may come under renewed selling pressure as equities rally,” he added.

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Associated Press Writer Tomoko A. Hosaka in Tokyo contributed to this report.