US shoppers lift Wall Street overnight

Good sales figures at big US retailers boosted Wall St overnight. Photo / Thinkstock

Retailers helped boost Wall Street after a surprisingly buoyant jobs report and better-than-expected sales at Gap and Target bolstered hope that consumer spending will propel the world's largest economy.

An ADP Employer Services report showed that US companies added 157,000 workers to their June payrolls, more than double the number analysts had anticipated. Investors are now keenly awaiting the US employment report for June, due tomorrow.

In afternoon trading, the Dow Jones Industrial Average gained 0.96 per cent, the Standard & Poor's 500 Index climbed 1.26 per cent and the Nasdaq rose 1.53 per cent.

Retail stocks were enjoying a field day. Limited gained more than 3 per cent while others including Target, Macy's, American Eagle Outfitters, American Apparel and Urban Outfitters all climbed at least 4 per cent.

The Standard & Poor's 500 Retailing Index, made up of 30 retailers, rose to a record, according to Bloomberg News.

"The market is predicting that the consumer will be fine in the future," Tim Hartzell, chief investment officer for Houston-based Sequent Asset Management, told Bloomberg. "The price goes up while earnings lag because the market knows that the early cyclicals are these retailers," adding, "They're fully priced and there's really no more upside."

Across the Atlantic, the European Central Bank lifted interest rates, as expected. It raised its benchmark interest rate by 25 basis points to 1.5 per cent.

ECB chief Jean-Claude Trichet said the central bank would relax rules and keep providing liquidity to struggling Portugal helping allay worries about Europe's debt crisis, comments that helped bolster the euro against the greenback

In mid-afternoon New York trade, the euro was at US$1.4351, 0.2 per cent higher on the day.

Trichet said the bank had decided to suspend the application of the minimum credit rating threshold in Portuguese collateral, according to Reuters.

"While to some extent this is a reaction to the recent downgrade of Portuguese debt, it also does show that the ECB position remains flexible, which could be important for ongoing discussions on a Greek debt rollover," Vassili Serebriakov, currency strategist at Wells Fargo in New York, told Reuters.

The US currency was up 0.4 per cent at 81.22 yen.

Oil prices also benefitted from the positive economic data in the US today.

ICE Brent crude futures for August delivery rose US$4.18 to US$117.80 a barrel by 1.10pm EDT.

"It's generally a confirmation that the weakness we saw in the May data was more in the way of a bump in the road rather than falling off into some abyss," David Resler, chief economist at Nomura Securities International in New York, told Reuters.

"The soft patch will prove to be a temporary one, but that doesn't mean we'll be roaring ahead with growth."