SHARES leapt on Wall Street last night as financial markets gave an enthusiastic initial response to President Bush’s choice of Ben Bernanke to succeed Alan Greenspan as Chairman of the US Federal Reserve.

After Mr Bush caught markets off-guard with an earlier than expected announcement on the Fed succession, Wall Street was cheered by the swift end to uncertainty over the President’s decision, and by a pledge by Mr Bernanke to stick by his revered predecessor’s policies.

The Dow Jones industrial average and the broader S&P 500 of US blue-chip shares staged their biggest one-day gains for six months. The Dow closed up 169.78 points, or 1.66 per cent, at 10,385.00, while the S&P gained 1.7 per cent, after the President made the long-awaited announcement at an Oval Office ceremony, accompanied by the man whom he is placing at the helm of the US economy.

"Ben Bernanke is the right man to build on the record Alan Greenspan has established," the President said.

Mr Greenspan, 79, is due to step down from the post regarded as America’s second most powerful on January 31, after more than 18 years in charge of the Fed.

Mr Bernanke praised the legacy left by a man who has steered the US to continued prosperity through a series of serious economic setbacks. "My first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years," he said in comments that came as an immediate reassurance to markets.

However, Mr Bernanke, who has been a forceful advocate of a move by the Fed to a British-style system in which it would set a formal inflation target, also hinted at future changes of approach.

"Our understanding of the best practice in monetary policy evolved during Alan Greenspan’s tenure at the Fed, and it will continue to evolve in future," he said, before emphasising his priority of continuity.

While equity markets rallied strongly on the news, the dollar and bond markets showed greater nervousness over the nomination of a Fed Chairman often seen by some as a relative "dove" on anti-inflation policy.

Both the dollar and US Treasury bond prices ended lower.

A Harvard graduate and former Princeton University economist, Mr Bernanke made his mark while a Fed Governor in November 2002, when he highlighted risks posed to the US economy by the threat of Japanese-style deflation and mapped out an aggressive strategy to ward this off. He was seen as a key figure behind the Fed’s subsequent, radical cuts in interest rates to a 40-year low of 1 per cent as it moved to bolster economic conditions.

Mr Bernanke, chairman of President Bush’s Council of Economic Advisers, was one of three front-runners for the post. His selection is not expected to lead to a confirmation battle on Capitol Hill. Richard Shelby, chairman of the Senate Banking Committee, called him an "eminently qualified and superb choice".

Announcing the decision yesterday will also provide the White House with a helpful diversion from congressional attacks on the President’s controversial Supreme Court nominee, Harriet Miers.

Mr Greenspan said that Mr Bernanke was a "distinguished" choice, with "superb academic credentials and important insights into the ways our economy functions", and would be a "credit to the nation".

Mervyn King, the Governor of the Bank of England, said that Mr Bernanke’s nomination would be "warmly welcomed around the world". He said: "Ben has the intellectual and personal qualities to lead the Federal Reserve in the years ahead."