US shoppers in brighter mood

The University of Michigan's closely-watched consumer sentiment index rose to 86.7 in December from 84.2 the previous month.

It was the second consecutive monthly increase, and a sign that American consumer confidence remains undimmed despite a weaker jobs market and fears of war against Iraq.

The index, which provides clues about consumer spending intentions, is seen as an key indicator of economic growth.

Consumer spending accounts for about two thirds of all economic activity in the US.

Future hopes

The latest index shows that consumers have become more positive about their current economic situation, and are also more optimistic about the year ahead.

The current conditions index rose to 96 from 93.1 in November, while the future expectations index rose to 80.8 from 78.5.

The improvement partly reflects a recovery in the US stock market , which has climbed 16% since pulling itself out of a two-month slump in mid-October.

However, the improvement in consumer confidence in the last two months, which followed a sharp decline in October, may have come too late for US retailers.

Retail gloom

Wal-Mart, the world's biggest retail business, said on Monday that like-for-like sales for December were 3-5% up on the year, at the low end of expectations.

And Federated Department Stores, owner of Macy's and Bloomingdale's, said it would probably miss its sales targets for November and December after a disappointing performance last week, traditionally the busiest in the retail calendar.

The downbeat retail sector news weighed on Wall Street, pushing the benchmark Dow Jones share index lower in early trade.