Wall Street ended mixed after a rise in retail stocks offset investor worries about the US soon reaching its debt ceiling.

Retail sales rose more than forecast in December indicating Americans were able to overlook Washington's strained budget negotiations in the month and keep spending.

Commerce Department data showed purchases climbed 0.5 per cent, the biggest gain in three months, after November's spending was also revised higher.

Some wealthy US consumers face a drop in take-home pay when taxes rise as a result of a budget compromise reached in December.

Meanwhile, US president Barack Obama has warned the economy will suffer if Congress fails to raise the debt limit and agree on further budget cuts.

The US has been using emergency measures to pay its bills since the end of December to prevent a breach of the $US16.4 trillion debt limit.

The last time the US was on the brink of breaching the debt ceiling was August 2011, when markets tumbled ahead of a last minute agreement that averted default.

By the close, the Dow Jones Industrial Average added 28 points, or 0.2 per cent, to 13,535.

The broader S&P 500 Index added 0.1 per cent to 1,472.

The technology focused Nasdaq Composite shed 0.2 per cent to 3,111.

Across the Atlantic, an official economic estimate shows Europe's largest economy, Germany, shrank in the final quarter of 2012.

The federal statistics office, Destatis, said the German economy contracted 0.5 per cent in the December quarter, but grew 0.7per cent in 2012.

Stocks in Europe were mixed.

The Euro Stoxx Index fell 0.5 per cent to 2,702.

London's FTSE 100 index managed a gain of 0.2 per cent to 6,117 after a choppy session where miners fell and retailers rose.

Germany's DAX lost 0.7 per cent to 7,676.

At 8:15am (AEDT) in Australia, the SPI futures contract was pointing to a loss of 3 points at the start of trade.

The Australian dollar was holding its ground against the greenback ahead of the looming battle in Washington over the US government's borrowing limit.

It was worth 105.61 US cents, it was also buying 79.33 euro cents, 65.72 British pence and 93.72 Japanese yen.

Spot gold prices were worth $US1,678.51 an ounce.

West Texas intermediate crude slipped to $US93.83 a barrel.

 

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