An opening bounce on Wall Street has given another push to the FTSE 100, which was already on track for its best close for 14 months.
Better than expected US retail sales has lifted the Dow Jones Industrial Average by more than 110 points in early trading. Sales rose 1.4% in October, compared to a 2.3% drop in September. Car sales bounced back from a slump in September after the end of the "cash-for-clunkers" scheme, showing a 7.4% surge. Without that, the overall rise would have been far less impressive. Rob Carnell at ING Bank urged caution:
In line with some of the softer recent consumer sentiment surveys, October's advance retail sales contains some worrying elements. The headline rise of 1.4% month on month is not at all bad, but follows a much worse September, which together with last week's poor trade figures, suggests that third quarter GDP will be revised down from 3.5% to something more like 3.2% on the basis of the additional data we have received so far.
Moreover, auto sales make up the bulk of the retail sales bounce this month, and stripping them out, sales rose only 0.2% (from a downward revised 0.4% in September). Whilst October car sales enjoyed a decent rise following the post-clunkers September collapse, we don't think this has the makings of a trend over the coming months. And though fourth quarter consumer spending will manage to make a small positive contribution to overall GDP growth, we doubt it will come anywhere close enough to provide the 3.0% growth consensus is looking for. Further weakness in consumer spending data in November and December will likely confirm this.
Still, with continued weakness in the dollar supporting commodity prices, investors seem determined to look on the bright side at the moment.
The FTSE 100 is now 82.86 points higher at 5379.24, with Lonmin still leading the pack. The mining group is up 149p at £17.41 as it talked of increased platinum production, while Xstrata was close behind, up 71p at £10.85p.
Financials however are edging lower, with RSA Insurance down 1.1p at 120.8p and Royal Bank of Scotland slipping 0.29p to 37.15p.
