There’s a lot of uncertainty floating around global stock indexes this week. German elections are set for next Sunday, and neither Angela Merkel nor her opponent, former German finance minister Peer Steinbrueck, have given any indication about what role Germany will play in reforms designed to prevent another euro crisis.
At the same time, Greeks took to the streets again today to protest the austerity measures that Brussels continues to demand in return for financial support. Last week, German Finance Minister Wolfgang Schaeuble said that Greece would be in need of a third bailout this fall, despite already receiving more than $320 billion in rescue funds.
In the past, this kind of uncertainty led to disastrous declines in global stock markets. But that's not the case today. European markets traded up to five-year highs today, with the German DAX hit an all-time high.
The reason? Larry Summers is out as a candidate for Federal Reserve chief.
European distrust of Summers dates back to the financial crisis. In recent weeks markets here traded accordingly, muddling along as his name was circulated as a possible replacement to Ben Bernanke.
But when European traders were greeted with the news of his pulling out of the running Monday morning, stocks took off on what Michael Hewson, senior markets analyst at CMC Markets in the City in London, called a "Summers Breeze." Hewson added that European traders prefer Janet Yellen, who is now the front-runner to replace Bernanke.
"Janet Yellen is widely perceived as being the heir to Bernanke’s legacy and the continuity she would bring to US monetary policy, as opposed to the uncertainty that would surround a Larry Summers candidacy," Hewson said, according to the Guardian.
Louise Cooper, analyst at Cooper City in London, was also enthusiastic about the choice, adding that Yellen would break one of the last glass ceilings in the financial world.
"I am a big fan of the immense intellect that is Dr. Yellen. In its 100 years, the Fed has never been led by a woman and President Obama could make history with the choice of Dr. Yellen," she wrote.