US share prices fell heavily last night, with the Dow Jones index losing 2.3 per cent, or 160 points, after a sharp rise in US retail sales in February led to renewed speculation that US interest rates may rise. Investors now fear that a rise could come possibly as early as March 25th, when the Federal Reserve holds the next meeting of its policymaking Open Markets Committee.

Retails sales rose by 0.8 per cent in the US in January, well ahead of the 0.6 per cent average forecast by Wall Street analysts. The increase in retail sales was the highest monthly figure for a year and led to a sharp sell off of US treasury bond markets while share prices on Wall Street also tumbled. Analysts had said before the report was released that steady job and income gains, a rising stock market and generally strong consumer confidence were bolstering retail demand.

Bond prices in the US fell a full point, bringing the yield on the benchmark 30 year long bond to its highest level since last September. Analysts now fear that the hawks in the Federal Reserve may use the latest retail sales figures as the excuse for the rate rise they have been looking for, despite last Wednesday's Beige Book comments that price pressures in the US are "moderate".