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Miners send FTSE soaring as Europe recovers from Yellen sell-off

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Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·4-min read
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US Treasury secretary Janet Yellen speaks during a virtual roundtable event in Washington, DC. Photo: Drew Angerer/Getty Images
US Treasury secretary Janet Yellen speaks during a virtual roundtable event in Washington, DC. Photo: Drew Angerer/Getty Images

European markets surged on Wednesday as stocks recovered from a global sell-off sparked by comments from US Treasury secretary Janet Yellen.

The FTSE 100 (^FTSE) ended the trading day up 1.8%, having closed in the red the previous session. The DAX (^GDAXI) rose 2% in Frankfurt and the CAC 40 (^FCHI) gained 1.3% in Paris.

"Coming off the back of a sharp pullback in European markets, today’s recovery highlights the underlying level of confidence that is building as the vaccination programmes throughout Europe gather momentum," said Joshua Mahony, a senior market analyst at IG.

Mining stocks powered the FTSE higher. Anglo American (AAL.L) surged 6%, while BHP (BHP.L), Glencore (GLEN.L) and Rio Tinto (RIO.L) all gained more than 4% on the day. Evraz (EVR.L) booked a gain of 3.8%.

"Copper prices have been rising steadily of late, with prices touching $10,000 [£7,194] as inventories dwindle in the face of insufficient supply," Mahoney said. "With western nations planning a raft of infrastructure spending in the coming years, there seems little sign that this commodity boom is about to end."

Irish building supplies group CRH (CRH.L) was one of the FTSE 100's best performers, rising 5.7%.

Read more: Fiat and PSA-merged car group Stellantis enjoys surging sales post merger

Hugo Boss (BOSS.DE) rose over 5.5% in Germany after predicting that sales would double in the second quarter. The luxury suit designer reported surging first quarter sales in China and online in the first quarter of 2021, although store closures in parts of the world meant overall revenues dipped 8%.

Watch: Hugo Boss raises guidance

Stellantis (STLA.MI) — the newly merged Fiat Chrysler and Peugeot-owner PSA — rallied 6.9% in Milan. Car shipments were up 11% in the first quarter thank to booming demand in markets like China. However, management warned that the ongoing shortage of microchips around the world would likely hit the business in the second quarter, before a rebound later this year.

Challenger bank Virgin Money UK (VMUK.L) slumped 1.6% in London after reporting half-year results. Income dropped 6% but profits nearly quadrupled thanks to much lower credit impairment charges. Analysts at Jefferies said there was a "marked absence of mortgage balance growth" when compared to rivals.

Read more: What we learned from European banks' earnings

Stock markets across Europe gained momentum after a positive open on Wall Street. The S&P 500 (^GSPC) and the Dow Jones (^DJI) were both up half a percent by the time European markets closed, while the Nasdaq (^IXIC) had gained 0.55%.

Markets around the world had sold-off on Tuesday afternoon as Janet Yellen warned interest rates in the US may have to rise to stop the US economy "overheating".

"It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat," the former US Federal Reserve chair told an event hosted by The Atlantic magazine.

Yellen walked back her comments later on Tuesday, saying she appreciated the independence of the Fed and didn't see inflation becoming a major problem, according to Reuters.

But the initial words revived fears about looming runaway inflation and led to a sharp sell-off for US stocks. The tech sector was hit particularly hard.

Read more: Bond tapering in focus as Bank of England delivers latest policy verdict

"Yellen’s comments took a lot of froth out of the markets," said Naeem Aslam, chief market analyst at Avatrade.

The sell-off spooked international investors. Asian markets were caught up in the wave of selling overnight — Japan's Nikkei (^N225) fell 0.8%, the Hong Kong Hang Seng (^HSI) closed down 0.6%, and the Shanghai Composite (000001.SS) was down 0.8%.

"When markets start to struggle to move higher on good news, as we saw last week, it usually doesn’t take too long before they rollover and head lower, which appears to be what happened yesterday," said Michael Hewson, chief market analyst at CMC Markets.

Watch: Will interest rates stay low forever?