European Markets Rise As Larry Summers Exits US Fed Race

European markets opened higher on 16 September on news that hawkish American economist Larry Summers had opted out of the race to head the US Federal Reserve.

The Stoxx Europe 600 index opened 0.7% higher to 313.54.

Britain's FTSE 100 opened 0.9% higher.

France's CAC 40 opened 0.7% higher.

Germany's DAX 30 was up 0.99% in early trade.

Spain's IBEX 35 was up 0.88% in early trade.

Italy's FTSE MIB was up 0.95% in early trade.

Fed Chairman Ben Bernanke is due to retire early in 2014. Market players considered Summers, one of two contestants for the top job, as someone who would adopt a hawkish stance regarding US monetary stimulus.

Vice Chair Janet Yellen has now emerged as the frontrunner for the top post.

"With Lawrence Summers now out of the Fed chair race, it makes dove Janet Yellen the favourite to be the next chairman of the US Federal Reserve," said Tim Radford, global analyst at Rivkin Securities.

"Summers was the clear favourite within the White House, given his contribution in guiding the US economy through the global financial crisis under President Barack Obama. But with growing opposition in Congress to the man that has been widely criticised and blamed for helping cause the 08/09 financial crisis due to his influence on deregulating the financial services industry, Summers has essentially been forced to pull out from the race," Radford said.

"It's widely believed [that Yellen] will continue Bernanke's pro-growth policies, if not taking a more aggressive stance," he added.

The Fed's FOMC will meet on 17-18 September. Economists polled by Reuters expect the Fed to trim its bond-buys by $10bn to $75bn a month, following the meeting.

Meanwhile, in the UK, the country's biggest business lobbyist, the Confederation of British Industry, called on the government to boost infrastructure investment after a survey of its members revealed the overwhelming majority doubt the effect current policies would have on the fragile economy.

In other news, property website Rightmove said UK home prices fell by 1.5% on the month in September. However, it raised its 2013 forecast for house price increases in the country to 6% from 4%, as housing supply is expected to fall short of demand this year.

In Asia and the US

In Asia, Australia's S&P/ASX closed 0.54% higher while South Korea's Kospi ended 0.96% higher, on 16 September. Financial markets in Japan were closed for a public holiday.

Earlier in Asia, markets rallied on news that Summers had withdrawn from the race to lead the Fed. However, concerns surrounding the future pace of the Fed's $85bn asset-buying stimulus forced markets to reverse early gains.

On Wall Street, indices ended higher on 13 September ahead of this week's Fed meeting.

The Dow finished 75.42 points higher at 15,376.06. The S&P 500 closed 4.57 points higher at 1,687.99 while the Nasdaq finished 6.22 points higher at 3,722.18.

For the week ended 14 September, the Dow rallied 3.04%, the S&P 500 jumped 3.37%, and the Nasdaq shot up 3.69%.