Janet Yellen is likely to become the next head of the Fed when Ben Bernanke’s term comes to an end in January. Last night traders breathed a sigh of relief as Larry Summers, who is in favour of higher interest rates and reducing the quantitative easing scheme, made it clear that he is not interested in the role. Ms Yellen is a much more welcome candidate, as she is known for supporting the bond buying scheme. For that reason, traders have been buying equities this morning.
Silver miner Fresnillo is off 12% after an announcement that the Mexican government is to introduce a new tax on natural resource companies. This is similar to the resources levy the Australian government introduced a few years ago. Petrofac is up 0.9% after the oil services provider won a five-year contract worth $120 million with a Malaysian energy company.
In the US the Dow is up 165 points at 15,541, as traders await Wednesday evening’s Fed announcement (London time) when some economists believe the Fed will trim the bond buying scheme by €10 billion. If the reduction is larger-than-expected we could see equities drop.