GLOBAL MARKETS-Stocks & bonds rally, dollar dips as Summers quits Fed race
* Dollar falls as Summers drops out of running for Fed chair * Summers was seen as more hawkish than Yellen * Shares, bonds rally on view policy to stay easy for longer * U.S. stocks advance, though Apple limits Nasdaq's rally By Ryan Vlastelica NEW YORK, Sept 16 (Reuters) - U.S. stocks and Treasuries rallied on Monday as investors saw the withdrawal of Lawrence Summers from the running to head the Federal Reserve as making a more gradual approach to monetary tightening more likely. Further boosting risk assets around the world, and weighing on the U.S. dollar, were signs of progress in Syria following a Russian-brokered deal aimed at averting U.S. military action, all of which helped propel world shares to a five-year high. Summers' surprise decision came just before the U.S. Federal Reserve meets on Tuesday and Wednesday to decide when, and by how much, to scale back its asset purchases from the current pace of $85 billion a month. Investors wagered that U.S. monetary policy would stay easier for longer should the other leading candidate for Fed chair, Janet Yellen, get the job. The Dow Jones industrial average was up 142.01 points, or 0.92 percent, at 15,518.07. The Standard & Poor's 500 Index was up 13.20 points, or 0.78 percent, at 1,701.19. The Nasdaq Composite Index was up 16.20 points, or 0.44 percent, at 3,738.39. Gains in the Nasdaq were limited by a 1.7 percent decline in Apple Inc shares. European shares rose 0.5 percent while the MSCI all-country world equity index rose 1 percent. Markets had perceived Summers as less wedded to aggressive policies such as quantitative easing and more likely to scale stimulus back quickly than Yellen, who is second in command at the Fed. "His passing as a contender for the top role has left in its wake a significant risk-on rally," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. It was even possible a first Fed interest rate rise could be pushed out to 2016, rather than 2015 as currently expected, added Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. Going by Yellen's past speeches, he said she would most probably prioritize reducing unemployment. "Yellen looks like the clear front-runner and seems to be the public's popular choice," he said. "The Fed will shoot to lower the unemployment rate to the full employment level, and this means the new target could be more 5.5 percent, not 6.5 percent." DOLLAR DIVE The dollar slipped to a near four-week low against a basket of currencies, with the euro up more than half a U.S. cent at $1.3370 after hitting its highest in almost three weeks and sterling at an eight-month high. The greenback proved more resilient against the yen, which was hampered by its status as a safe haven and pared early losses to stand at 98.76. Liquidity was lacking, with Japanese markets closed for a holiday on Monday. In the latest U.S. data, industrial output rose 0.4 percent in August, as expected, while manufacturing output rose 0.7 percent, a slightly faster rate than had been forecast. MSCI's broadest index of Asia-Pacific shares outside Japan had gained 1.8 percent overnight as South Korean shares added 1 percent, Australia's rose 0.5 percent and Indonesian stocks climbed 3.4 percent. PUSHING OUT THE HIKE Sentiment was underpinned by Saturday's deal between Russia and the United States to demand that Syrian President Bashar al-Assad account for his chemical arsenal within a week and let international inspectors eliminate all the weapons by the middle of next year. The benchmark 10-year U.S. Treasury note was up 27/32, with the yield at 2.7885 percent. German Bunds tracked the moves and were last at 1.870 percent, well down on last week's peak of 2 percent. The more distant Eurodollar contracts rallied as the market pared back expectations for how quickly the Fed might finally start to tighten, as opposed to just tapering its stimulus. Contracts from late 2014 out to 2016 all made double-digit gains suggesting a hike was now considered more likely in 2015, rather than in late 2014. Emerging market stocks were up 1.6 percent and most emerging Asian currencies were on the front foot, with India's rupee leading the charge. Investors have pumped much of the cheap money from the Fed into emerging markets. Gold fell 0.3 percent, while Brent crude lost 1.4 percent to $110.13 a barrel and U.S. crude futures sank 1.1 percent to $107.02 per barrel.