Tiffany opened its new Wall Street store on 10 October

Many retailers are bracing themselves for a tough Christmas, especially in the US, where the housing slump is expected to hit consumer spending.

But Tiffany has raised its sales forecast for the whole of 2007.

The jeweller has also announced a deal with Swatch Group, which will make all of its watches in future.

The new watch company will be owned by Swatch Group

Tiffany watches currently make up between 2% and 3% of its total sales and it hopes that the partnership with the world's biggest watchmaker will help to boost that figure.

Under the terms of the deal, Swatch will set up a new company that will manufacture and sell Tiffany watches through its global network.

The new company will have the right to make existing Tiffany designs and open Tiffany-branded shops outside of the US.

Tiffany has raised its overall sales forecast for 2007 by 1%, but is taking a $20m (�10m) charge because it will have to discount watches in lines that it is discontinuing.

Some analysts share Tiffany's optimism about its outlook for earnings growth and expect that upmarket retailers will be hit less hard by the expected economic downturn than other cheaper rivals.

And they added that Tiffany's new store at 37 Wall Street, which was opened in October, could be seen as a vote of confidence in the long term performance of financial markets.