US retail sales rose by 1.2pct in October - marking the biggest monthly gain in seven months and well ahead of expectations (0.7pct). Healthy sales were reported across most categories with sales of motor vehicles (+5.0pct) and building materials (+1.9pct), leading the strong result. Core retail sales rose 0.2pct.

The New York Fed Empire State index fell from 15.7 to -11.1 in October - the weakest reading since April 2009. The survey´s forward looking index of business conditions -six months ahead- was more upbeat rising from 40 to 54.6. US business inventories rose 0.9pct to $1.40 trillion in September. August inventory data was also revised higher - suggesting that initial estimates of 2pct for third quarter GDP may be revised higher.

European shares posted strong gains on Monday, as upbeat US retail sales data supported investor sentiment. M&A activity also fuelled further buying. Automakers moved higher following speculation Volkswagen could take control of Sweden´s Scania. The FTSEurofirst index rose 0.7pct, the UK FTSE gained 0.4pct and the German Dax rose by 0.8pct.

US sharemarkets gave back strong gains in late trade on Monday. The better than expected retail sales reading boosted investor confidence in early trade. Basic material stocks were bid higher after Caterpillar agreed to buy mining equipment maker Bucyrus International for $7.6 billion. At the close of trade, the Dow Jones was up 9pts or 0.1pct, the S&P 500 down 0.1pct and the Nasdaq lower by 4pts or 0.2pct.

US long-term treasuries fell (yields higher) on Monday as dealers closed out more positions tied to the US Fed´s QE2 program. The Fed bought $7.9 billion in mid-term Treasury paper on Monday. US 2yr yields rose 2pts to at 0.53pct and US 10yr yields rose by 16pts to 2.95pct.

The Euro remained under pressure against the US dollar on Monday as debt issues in Ireland continued to be in focus. The Euro fell from highs near US$1.3685 to US$1.3560, heading into the US close near its lows. The Aussie dollar traded between US98.10c and US99.15c, heading into the US close near US98.40c. And the Japanese yen is currently around 83.15 yen per US dollar after trading from JPY82.65 to JPY83.20.

US crude oil prices were largely unchanged on Monday. Strong Japanese September quarter growth figures initially supported prices before the strength in the dollar eroded gains. The Nymex crude oil contract fell US2 cents to US$87.86 a barrel.

Base metal prices were mostly weaker on the London Metal Exchange on Monday. The slide in US manufacturing data added to the recent weakness. Copper managed steady after the recent slide rising 0.5pct. Other metals fell by 0.1-2.7pct. And the gold price edged higher with Comex gold futures up US$3.00 an ounce to US$1,368.50.

Ahead: In Australia, the Reserve Bank board minutes are released. In the US producer prices, industrial production and capacity utilisation are released.

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