European markets finished sharply higher on Wednesday following dovish comments by U.S. Federal Reserve chair Janet Yellen and a solid recovery in commodity stocks.
The pan-European STOXX 600 came off session highs, yet closed 1.3 percent higher provisionally, with all sectors finishing trade in positive territory.
European markets followed a positive lead set in Asia overnight after remarks from Federal Reserve chair Janet Yellen eased concerns about a near-term interest rate hike.
Speaking to the Economic Club of New York on Tuesday, Yellen noted in prepared remarks that it was appropriate for policymakers to proceed "cautiously." She noted recent readings on the strength of the U.S. economy since the beginning of the year have been mixed.
On the policy front, she said research suggests that, with a funds rate at zero and increased uncertainty, the best policy would be greater gradualism. Still, the Fed can hike if the economy grows faster, she said.
While most indexes closed higher in Asia, Japanese shares retreated after industrial output data showed fragile factory activity due to sluggish demand both at home and abroad. Reuters reported that industrial output fell 6.2 percent in February, compared to forecasts from economists, who expected a 6 percent decline.
Commodities stocks got a solid boost from Yellen's dovish stance which sent the dollar lower. A lower dollar led to an uptick in the price of Brent during London trading hours. However in later trade, the EIA announced that U.S. crude stockpiles had risen by 2.3 million barrels in the last week. Oil prices came off session highs in later trade, with Brent up over 1 percent, at $39.77, while US crude rose to $38.87.
"The good aspect of Yellen yesterday is the dollar. Dollar going down is clearly good for global growth, it's good for commodities, and it's good for emerging markets where the growing consumers are…that could pull the global growth up," Bruno Verstraete, partner at Lakefield Partners, told CNBC Wednesday.
And a number of miners also got a boost, supported by a positive outlook from brokers on some stocks and an increase in many metal prices. Anglo American jumped almost 12 percent and Glencore closed over 5 percent up after Jefferies raised its price target for the stocks. Basic Resources saw the biggest gains as a sector, closing 4.6 percent higher overall.
Shares in German retailer Metro soared 11.5 percent after it outlined a proposal; to split itself in two into a wholesale and food business, and a separate consumer electronics group.
French supermarket chain Carrefour rose 3.8 percent after Península Participações Ltda upped its stake in the company, having bought an additional 2.98 percent.
Several Italian banks were sitting near the bottom of Europe's benchmarks, after a report by the Financial Times said Unicredit was in talks with the government over seeking support for a 2 billion euro ($2.27 billion) capital raising at bank, Popolare di Vicenza. Unicredit was off 3.4 percent, while Banca Popolare de Milano and Banco Popolare also closed sharply lower.