HONG KONG (AP) -- Asian stock markets drifted Wednesday as news the Federal Reserve's vice chair will be nominated to head the U.S. central bank gave only a slight lift to investor sentiment darkened by an IMF warning on the global economy.
The White House said President Barack Obama would nominate Janet Yellen to succeed Ben Bernanke. She's a close ally of Bernanke and has been as a key architect of Fed efforts under his leadership to keep interest rates close to record lows to bolster the world's biggest economy, so her selection is seen as a sign that the policy will likely continue.
The yen weakened and Japanese stocks rose but otherwise market reaction was mostly muted since Obama had been widely expected to tap Yellen after front-runner and former Treasury Secretary Lawrence Summers withdrew his candidacy.
"I think it's more politics than reality, but it's slightly positive for investor sentiment, certainly," said Andrew Sullivan, director of Asian sales trading at Kim Eng Securities.
"Yellen is very much in the same camp as Bernanke, so we're not going to see any major policy change. That's the relief to the market."
On the other hand, investors were getting edgier about as the deadline to raise the debt ceiling drew closer. A failure to raise the limit by Oct. 17 would raise the possibility of a U.S. debt default, which has the potential to seriously roil global markets. Political wrangling over spending has already left the U.S. government partially shut for eight days.
The International Monetary Fund also weighed in, warning about the harm to the global economy if the U.S. failed to raise its borrowing limit, as it cut its global economic growth forecasts for 2013 and 2014.
Sullivan said even though there's little chance that the U.S. could end up defaulting, investors are paying so much attention to the debt limit because there's "very little" other market-moving news, especially as U.S. companies go into a blackout period ahead of third-quarter earnings.
The dollar rose to 97.34 Japanese yen from 96.85 yen in late trading Tuesday while Japan's Nikkei rose 0.8 percent to 14,011.07.
Hong Kong's Hang Seng index fell 0.6 percent to 23,047.14 while in mainland China, the Shanghai composite index slipped less than 0.1 percent to 2,196.54. Australia's S&P ASX 200 edged marginally higher to 5,152.60. Benchmarks in Taiwan and New Zealand fell but Singapore's rose.
South Korea's Kospi was closed for a holiday.
In the U.S., the Dow Jones industrial average fell 1.1 percent to close at 14,776.53 while the S&P 500 index dropped 1.2 percent to 1,655.45. The Nasdaq composite dropped 2 percent to 3,694.83.
The euro fell to $1.3567 from $1.3602.
Benchmark crude for November delivery fell 3 cents to $103.46 a barrel. The contract rose 46 cents to settle at $103.49 on Tuesday.