MW : Global markets not surprised by Bernanke's reappointment
President Barack Obama is poised to announce the reappointment of Bernanke later Tuesday, news reports said. See full story on Bernanke's reappointment.
Asian equities ended mainly lower and European stocks followed suit, while U.S. stock index futures were flat. The dollar index (DXY 78.27, -0.01, -0.01%) was largely flat after posting a modest uptick, while U.S. Treasurys were little moved.
Economists largely expressed relief but little surprise over the reappointment. Bernanke's current four-year term ends in January.Strategists said signs that the U.S. economic downturn has at least bottomed out and that the financial system has moved back from the brink helped cement perceptions Bernanke would be retained.
The news will serve to reinforce expectations that the Fed "will not be rushed" to undo its credit-easing efforts, said Kenneth Broux, market economist at Lloyds TSB.
Led by Bernanke, the Fed has pumped hundreds of billions of dollars into the financial system and cut U.S. interest rates virtually to zero in the wake of the financial crisis. The Fed has vowed to undo the measures in a timely manner but must proceed with caution, economists say.
Fed policy makers indicated earlier this month they will eventually stop buying long-term U.S. Treasury notes and bonds, which has been part of an effort to hold down long-term interest rates.
The Fed has also indicated it will be in no rush to lift official interest rates from their current level near zero.Strategists at Brown Brothers Harriman said market opinion had shifted in recent months in favor of another term for Bernanke.
As a result, "the only real surprise could lie in the timing, but most observers seemed to expect the decision within weeks in any event," they said in a note to clients.
There had been some speculation that Lawrence Summers, the White House economic adviser and former Treasury secretary in the Clinton administration, had sought the post.
"Arguably his sharp elbows and unrefined diplomatic skills would have made him a poor choice, particularly at this crucial time," the Brown Brothers Harriman strategists said of Summers.
Failure to keep on board "the man who has led the U.S. turnaround so far would severely jeopardize the positivity in equity markets and so his re-appointment would seem to be effectively 'locked in,' " said Joshua Raymond, market strategist at City Index
