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Markets welcome Yellen's expected Fed nomination

Pan Pylas, AP Business Writer

LONDON (AP) -- Markets settled Wednesday as investors set aside concerns over the U.S. budget stalemate and welcomed reports that Janet Yellen will be nominated to become the next chairman of the Federal Reserve.

Yellen, currently Ben Bernanke's number 2, is thought to be a safe pair of hands and considered a supporter of the Fed's monetary stimulus. President Barack Obama is expected to make the nomination official later.

Investors have viewed the expected appointment through the prism of the Fed's monetary stimulus. One of the big debates in financial markets this year has centered on when the Fed will start reducing — or "tapering" — its stimulus. Currently, it is buying $85 billion a month of financial assets in an effort to shore up the U.S. economic recovery. The money has found its way into markets, supporting stocks.

"Yellen is a well-known dove in terms of her stance on monetary policy and has been a strong supporter of Bernanke's accommodative policies," said Neil MacKinnon, global macro strategist at VTB Capital.

In Europe, the FTSE 100 index of leading British shares was steady at 6,367 while Germany's DAX rose 0.3 percent to 8,577. The CAC-40 in France was 0.6 percent higher at 4,158.

Wall Street was poised for a solid opening, with Dow futures up 0.2 percent and the broader S&P 500 futures 0.3 percent higher.

One reason why Fed policymakers did not begin tapering at their last policy meeting last month is thought to have been concern over whether the different arms of the U.S. government could agree on a budget and the raising of the debt ceiling. Minutes to the meeting, due to be released later Wednesday, will provide clearer guidance on their surprise decision not to taper.

Any concerns appear to have been well-founded, given that the partial shutdown of the U.S. government has entered its ninth day and the debt ceiling deadline of Oct. 17 nears. A failure to increase the so-called debt ceiling would raise the possibility of a U.S. debt default, which has the potential to seriously roil global markets.

Despite those concerns, the dollar has garnered some support following a disappointing run in recent trading sessions. The euro was down 0.6 percent at $1.3526 while the dollar rose 0.5 percent to 97.34 yen.

"While the market is starting to digest the prospect of more policy accommodation from the Fed, there is simultaneously plenty of anticipation that as the U.S. debt ceiling deadline nears that the dollar will prove itself to be a store of value," said Jane Foley, an analyst at Rabobank International.

Earlier in Asia, the mood was fairly solid amid the Yellen speculation. Japan's Nikkei rose 1 percent to close at 14,037.84 but Hong Kong's Hang Seng index fell 0.6 percent to 23,033.97. South Korea's Kospi was closed for a holiday.