All eyes had been set on the Federal meeting this week, so last night’s news about Larry Summers withdrawing from the race to succeed ‘Helicopter Ben’ was something of a bolt from the blue. Overnight markets raced higher, but some of these gains have been given back in the first part of this morning’s session. Still, to all intents and purposes it looks as if Janet Yellen is now a shoe-in for the top job, something that will keep traders in a better mood in the long winter months of tapering that probably lie ahead.
In London the rally has been broad-based, with investors enjoying a last moment of sun before they have to hunker down and await developments in Wednesday’s Fed meeting. For the FTSE 100 the target remains 6700, but it might be too much to ask the index to reach this point before Ben Bernanke’s press conference on Wednesday.
Talk of a mining levy in Mexico has hurt silver miner Fresnillo, whose shares are in full-fledged rout this morning, down 12%. Given that its operations are entirely concentrated in Mexico, this could hit the company hard, and strenuous lobbying efforts will be needed if the firm’s appeal is not to be heavily dented.
US futures have been given quite the lift by the Summers news, which could lead to an exciting start to the week. However, the main event remains the Fed meeting, and it would not be surprising to see markets struggle to hold on to the advances made on the first day. Empire manufacturing and industrial production fill up the economic calendar this afternoon, as the run down into Wednesday’s meeting begins in earnest. Ahead of the open, we expect the Dow Jones to start 170 points higher at 15,546.