* Equities rise on hopes for financial earnings
* Goldman Sachs, U.S. retail sales support mood
* European shares up 0.8 percent, Japan gains 2.3 percent
* Dollar mixed, yen weaker
By Jeremy Gaunt, European Investment Correspondent
LONDON, July 14 (Reuters) - A burst of confidence in U.S. financial stocks lifted global equities on Tuesday and Goldman Sachs kept the mood buoyant with a strong set of earnings.
U.S. retail sales for June also came in better than expected, reinforcing upbeat sentiment.
Wall Street looked set for a positive start and the dollar recovered early weakness.
World stocks as measured by MSCI were up 1 percent and the emerging markets sector index jumped 2.4 percent.
"We are going into the earnings season so the optimists will look for signs of a confirmation of recovery," said Jonathan Lawlor, head of European research at Fox-Pitt, Kelton.
Wall Street rallied more than 2 percent on Monday after bullish comments on financial sector performance by analyst Meredith Whitney lifted hopes that banks' quarterly results may be stronger than expected.
At the same time, the VIX volatility index, sometimes called the fear gauge, had its biggest daily percentage drop since March 10, the day this year's stock market rally started.
Goldman reported a 33 percent rise in quarterly earnings as a strong gain in trading was offset by a one-time charge to repay government loans.
"They outperformed everybody's expectations which is not particularly unusual," said Richard Bove, analyst at Rochdale Securities. "I think it's a pretty strong signal that other capital market companies will do well.
Bank of America Corp, JPMorgan Chase & Co and Citigroup Inc will report later in the week.
European equities were extending the previous session's sharp gains, lead by banks and miners. The FTSEurofirst 300 index of top European shares was up 1 percent after surging 2 percent on Monday.
Earlier, Japan's Nikkei average gained 2.3 percent to snap a nine-day losing streak.
"After a recent bearish run, the market has been looking for an opportunity to rebound," said Yutaka Miura, senior technical analyst at Mizuho Securities.
DOLLAR, YEN PRESSURED
The dollar recovered some earlier losses and the yen was under pressure.
The dollar index, a gauge of its performance against six major currencies was flat, off its lows at 80.07.
The dollar was up a quarter of a percent at 93.16 yen after hitting a five-month low of 91.73 yen on electronic trading platform EBS on Monday.
Euro zone government bonds were also under pressure.
In the cash market, bond yields, which move inversely to prices, all rose. The two-year Schatz yield climbed 5 basis points to 1.253 percent, while the 10-year Bund yield gained 6 basis points to 3.334 percent.
"Given the rally we've had, the risk is to the downside," said a bond trader in London. (Additional reporting by Atul Prakash and Ian Chua; Editing by Mike Peacock) (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Hub click on http://blogs.reuters.com/hedgehub)