REUTERS/ Jim YoungFormer National Economic Council Chairman Larry Summers and former Treasury Secretary Tim Geithner in December 2010.
Good morning. Here’s what you need to know.
- Asian markets surged. Korea’s KOSPI was up 0.96%; Hong Kong’s Hang Seng, 1.47%; and Thailand’s SET, a whopping 2.84%. European markets were all up, and U.S. futures were pointing higher.
- Larry Summers, the man suspected to become the next Federal Reserve chairman, withdrew his name from the running last night. “I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation’s ongoing economic recovery,” Summers wrote to the president.
- The dollar immediately weakened on the news that Summers was out. Emerging markets, on the other hand, rallied. Market-watchers are pointing to the fact that Summers was perceived as more hawkish — meaning less likely to use monetary policy to juice the economy — than his main rival and current frontrunner Janet Yellen.
- Many are now predicting (and for some, hoping) that Fed Vice Chair Janet Yellen will win the nomination. Writes our Josh Barro: “She’s a key architect and proponent of the Fed’s appropriately accommodative monetary policies. Her selection would reassure financial markets that easing would continue as appropriate. And she doesn’t have Summers’ track record of undermining his initiatives by unnecessarily alienating people.” Other names being floated are former Fed Vice Chairmans Don Kohn and Roger Ferguson. Former Treasury Secretary Tim Geithner has held steady that he does not want the job.
- Inflation continues to be a problem in India, where wholesale prices spiked 6.1% year-over-year in August, up from 5.79% in July. Economists were expecting prices to decelerate 5.7%. Onion prices, an inflation bellwether in India, climbed an astonishing 51% between July and August.
- Eurozone consumer price inflation remained at 1.3% in August, holding steady from last month and in line with economist expectations. The European Central Bank has been targeting a rate just below 2%.
- This morning at 9:15 A.M. we’ll get U.S. industrial production figures. Economists are expecting a 0.5% increase in August after July’s 0% print.
- Later this week, the Federal Reserve will hold its two-day FOMC meeting. Economists are expecting the Fed to “taper” its $US85 billion a month purchasing plan of Treasury notes and mortgage-backed bonds. On weaker economic news, many on Wall Street are predicting a “taper lite” — a reduction in bond purchases of $US10 billion per month, bringing the total monthly purchase down to $US75 billion (as opposed to the previous market consensus of $US70 billion).
- The U.S. housing market is showing signs of cooling after a yearlong hot streak, report the Wall Street Journal’s Nick Timiraos and Conor Dougherty. “Redfin, an online real-estate brokerage, said its agents had multiple bids on 61% of its homes in August, down from 76% in March,” a trend demonstrating a moderation in demand, they write.
- On the precipice of possible American military intervention, the U.S., Russia, and Syrian president Bashar al-Assad have reached a deal regarding the state’s chemical weapons. As Reuters’ Dominic Evans reports, “By requiring Assad to surrender a chemical weapons arsenal which until last week his government had barely acknowledged, it would strip him of both a fearsome military advantage over rebels at home and his most potent deterrent to any further attacks by Syria’s enemy Israel.”