Janet Yellen, the woman set to replace Ben Bernanke as head of the US Federal Reserve, has restored confidence across global equity markets after stating that the central bank's stimulus must remain in place in order to continue supporting a fragile economy.
Yellen stated that although good progress has been made, it is still too early to begin tapering the bond-buying program, as growth remains soft and unemployment is at 7.3%. She said "We have farther to go to regain the ground lost in the crisis and the recession."
Whilst she denied that the Fed's easy money program had generated bubbles in the property or stock markets despite strong gains being recognised, Yellen also stressed that the stimulus could not continue forever and acknowledged the risks of the Fed piling up billions of dollars worth of bonds.
US markets reacted positively to the news with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) following suit. On Friday, it gained 0.9%, led by Telstra (ASX: TLS) as well as the nation's key financials. The telecommunications giant gained 0.8% whilst ANZ (ASX: ANZ), NAB (ASX: NAB), Commonwealth Bank (ASX: CBA) and Westpac (ASX: WBC) gained 1.4%, 1.5%, 0.8% and 1.1%, respectively. Macquarie Group (ASX: MQG) also rose 1.7%.
