The FTSE 100 has jumped almost 1% after former US Treasury secretary Larry Summers withdrew his candidacy to replace Federal Reserve chair Ben Bernanke next year.
Summers (pictured), the favourite to replace Bernanke, exited the race last night after both economists and US senators said they would opposite his selection.
With investors having anticipated a faster withdrawal of monetary stimulus under Summers' tenure, markets rallied in the hope of a slower withdrawal of QE next year.
The FTSE 100 rose as much as 0.95% in early trading to 6,645, with US equity index futures up 1% and 10-year treasury bond yields falling from 2.88% to 2.81%.
In Europe, Germany's DAX rose 1% to reach an all-time high of 8,604. Earlier, Asian equity markets also posted healthy gains, with Hong Kong's Hang Seng closing up 1.5% at 23,252.
The dollar, meanwhile, fell to a fresh eight-month low against sterling. Sterling rose to $1.5958, its highest level since January.
Janet Yellen, vice chair of the Fed board of governors, is now the frontrunner in the race to replace Bernanke on 31 January next year.
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