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UK and European markets rallied on Wednesday (10 February), putting a three-day losing streak behind them as financials drove markets higher across the region, while a cautious speech from Federal Reserve Chairwoman Janet Yellen did not spoil the mood.
London's FTSE 100 closed up 0.71% at 5,672.30 but its European counterparts fared even better, with Germany's Dax and France's CAC 40 gaining 1.55% and 1.59% respectively, while the Pan European Stoxx 600 rose 1.87%
Meanwhile, oil prices wavered, with Brent crude gaining 1.91% to $30.91 (£21.35, €27.53) a barrel, while West Texas Intermediate lost 0.36% to $27.84 a barrel, as both benchmarks relinquished some of the gains they had posted earlier in the day.
Speaking to the US Congress, Yellen said that financial conditions "have become less supportive to growth" since the Fed raised interest rates in December and that those conditions could have a negative effect on the US economy.
Analysts interpreted Yellen's comments as an admission the Fed had lifted interest rates too early, as policymakers misread the economic environment in the US. "Nothing had fundamentally changed in December, but the Fed decided to ignore the fundamentals and move US monetary policy to a place that's less supportive of growth," said Accendo Markets analyst Augustin Eden.
In the UK, banking stocks were the stand-out gainers earlier in the day, but their rally petered out, leaving Prudential as the only finance-related stock in the top five risers on the FTSE 100.
Tesco was also on the front foot, after a Kantar Worldpanel report released on 9 February confirmed the retailer was on the right track, while computer chip producer ARM Holdings fell despite reporting a surge in profit and sales in its financial year, due to concerns about the chip market and slowing sales of Apple's iPhone 6, which uses ARM's A8 CPU.
Dunelm Group and Domino's Pizza led the risers on London's second-tier index as both surged over 10%. The former rallied after announcing a special dividend after an impressive performance in the first six months of the year, while the latter rose after analysts at Credit Suisse upgraded the stock from 'neutral' to 'outperform' and added it to the Europe Small and Mid-Cap Focus List.
At the other end of the scale, Tullow Oil plunged after the troubled oil business told investors revenue slipped by 27% in 2015, compared to 2014, even though it narrowed its pre-tax loss by 37%.
On the macroeconomic front, the news was not as positive, as official figures released by the Office for National Statistics showed the UK's industrial output fell further than initial estimates.
"December's sharp drop in industrial production will fuel concerns about the UK economic outlook as well as the unbalanced nature of growth," said Howard Archer, chief European and UK economist at IHS Economics.
"It will also likely harden views that the Bank of England will not be raising interest rates during 2016. However, we believe it remains highly unlikely that the Bank of England will cut interest rates."
FTSE 100 - Top 5 risers
Worldplay Group +5.72%
International Consolidated Airlines +4.84%
FTSE 100 - Top 5 fallers
ARM Holdings -4.36%
Randgold Resources -3.47%
Ashtead Group -3.21%
TUI AG -2.86%
FTSE 250 - Top 5 risers
Dunelm Group +12.12%
Domino's Pizza Group +9.81%
Sophos Group +8.23%
Ocado Group +7.57%
FTSE 250 - Top 5 fallers
Tullow Oil -7.80%
Nostrum Oil & Gas -4.14%
Telecom Plus -3.72%
Ashmore Group -3.07%