By Greg Peel

The Dow rose 118 points or 0.8% while the S&P gained 0.6% to 1697 with the Nasdaq easing 0.3%.

Bridge Street had a strong session yesterday which was largely a pre-emptive response to expectations of how Wall Street would react last night. The weekend news included the signing of an agreement between the US and Russia that the US would not strike the Assad regime if Russia succeeded in quarantining Syrian stockpiles of chemical weapons, and the withdrawal by former Treasury Secretary Larry Summers of his candidacy for new Fed chairman.

While President Obama insisted a strike will still be very much on the cards if Assad fails to sufficiently comply, Wall Street has decided the issue is dead for now. Iran is laughing, Israel is angry, but America just doesn't care.

With the withdrawal of Summers the assumption is vice-chair Janet Yellen will be announced as the anointed one. Summers is seen as hawkish and anti-stimulus as well as abrasive in character, while Yellen's views more align with the measured approach of outgoing chair Ben Bernanke. Taking Summers out of the equation eases Wall Street fears of too-fast tapering at a time US economic data remain less than convincing. Markets expect tapering to be announced on Wednesday, but only by increment.

The initial response to the Summers news was a sharp dip in the US dollar in yesterday's Asian session, but US traders soon tempered the falls once they were on deck. The US dollar index is 0.3% lower at 81.28 on the basis of a gradual, rather than sharp, reduction in money printing ahead. By rights one should thus expect a rise in the gold price, but instead gold fell US$18.30 to US$1309.60/oz. Whether fast or slow, tapering is now being assumed by the gold market as a given.

The Aussie reacted as might be expected, rising 0.8% to US$0.9319. Emerging market currencies which have been severely beaten down of late on the expectation of a flight of investment capital and a US dollar rise also enjoyed a respite bounce.