Retailers' fortunes set the tone for the US economy

Investors shrugged off worries about the economic damage inflicted by power cuts across a huge swathe of the eastern and central US to focus instead on signs of underlying economic recovery.

The Dow Jones Industrial average rose nearly 1% on Monday to close at 9,412.45, its highest level since 20 June 2002.

The tech-based Nasdaq index soared 2.2% to finish at 1,739.49.

The broader Standard and Poor's 500 index also put on almost 1% to 999.74.

In the last few weeks, US firms have published details of their earnings during the second quarter of 2003 and overall the picture has been better than expected.

Three continents

The US stock markets' boisterous performance followed an upbeat stock trading session in Tokyo.

European stock markets have also been gaining ground recently, with London's blue-chip FTSE 100 index closing at a 12-month high on 14 August.

Japan's benchmark Nikkei index finished above the psychologically important 10,000 level for the first time in a year on Monday.

It pushed higher again on Tuesday to achieve a 2003 record, up 1.4% at 10,174.10.

Recently published economic figures suggest that a recovery is looming in both countries.

Good news from major retailers buoyed up US stock markets on Monday.

Wal-Mart, the world's biggest retailer, said its back-to-school sales season was fulfilling its expectations, with sales growth at the top end of its forecasts.

"If Wal-Mart is doing well than the consumer is doing well because Wal-Mart is the largest retailer we have," Jeffries and Co chief market analyst Art Hogan told BBC World Business Report.

Home retailer Lowes beat expectations with a 28% jump in full year profits.