By Daniel Inman
Asian stocks Monday started the week higher and U.S. futures
rose after Larry Summers withdrew his name from consideration for
Chairman of the Federal Reserve, allaying investor concerns about
faster withdrawal of economic stimulus in the world's biggest
economy.
Summers had been thought to be President Barack Obama's first
choice to succeed Ben Bernanke as the Fed chairman, and many
investors had considered him to be a candidate that was more likely
to curtail the central bank's aggressive moves to stimulate the
economy. Another potential candidate for the job is Vice Chair
Janet Yellen.
"Markets will take confidence from the view that a Yellen Fed is
unlikely to put much pressure on economic growth rates by
withdrawing monetary stimulus too soon." said Ric Spooner, chief
market analyst at CMC Markets.
Stocks across the region were higher; with the Hang Seng Index
up 1.2% in Hong Kong, the S&P/ASX 200 up 0.6% in Australia and
South Korea's Kospi 0.6% higher.
Futures also pointed to a strong start in the U.S., with S&P
500 futures up 18.3 points to 1,700.30, while Dow Jones Industrial
Average futures added 168 points to 15,479.00.
Markets in Southeast Asia, which have been hit hard this summer
by fears of a withdrawal of U.S. stimulus, were the best
performers. Thailand's SET jumped 2.6% and the Philippines PSE
Composite added 1.9%.
Gold moved 1.6% higher to $1,329.40 an ounce.
The improved risk sentiment supported a wide range of cyclical
stocks including energy and resources companies. BHP Billiton Ltd.
(BHP) was 0.6% higher and rival Rio Tinto Ltd. (RIO) gained 1% in
Sydney, Cnooc Ltd. (CEO) added 0.8% in Hong Kong, while Noble Group
Ltd. rose 5% in Singapore.
Dividend-rich bank stocks outperformed in Hong Kong on
expectations U.S. monetary policy will likely maintain a dovish
tone and keep Treasury yields relatively low. Bank of China Ltd.
gained 1.4% and HSBC (HBC) rose 4.3%.
There was also a sharp move in the currency market, with the
dollar (DXY) weakening against a number of currencies. The dollar
weakened to Yen98.84 against the yen (USDJPY), compared with
Yen99.37 late Friday in New York. The Australian dollar jumped to
93.33 U.S. cents and the euro was last at $1.3368.
"I think that the market is quite happy with the move that's
occurred. Just because Summers has withdrawn himself from the race
does not mean Yellen is going to be the automatic candidate," said
Sam Tuck, Auckland-based senior manager for FX at ANZ New
Zealand.
The main event for global markets this week will be the Federal
Reserve's policy meeting, where some investors believe that the
central bank will start to roll back its bond-buying program. Asian
markets, especially in Southeast Asia, have proved particularly
vulnerable to the threat of so-called "tapering".
Wellington-based BNZ FX Strategist Mike Jones said while the
move was sharp he didn't expect much more action in Asia. "I think
we have seen the bulk of the move. It might just settle back a
little and we still have the FOMC to come," he said.
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