Yellen’s dovish interest rate comments cheer investors

European stock markets rose on Tuesday, as stronger insurance shares offset weaker commodity-linked stocks, which fell in tandem with lower metals and oil prices.

The Iseq in Dublin rose by 1.1 per cent while Germany’s Dax climbed 0.4 per cent and the Cac 40 in France was up 0.9 per cent.

Financial stocks weighed heavy on the London market, however, after the Bank of England told lenders to shore up their balance sheets ahead of the referendum on the UK's future in the European Union.

Wall Street swung into positive territory after US Federal Reserve Chair Janet Yellen said the central bank should proceed "cautiously" on raising interest rates. Some investors had been expecting a more hawkish line from Ms Yellen.

Dublin

Ryanair reclaimed some of the ground it lost following last week's attacks in Brussels, finishing the day up 1.8 per cent at more than €14.02 per share. It was down early in the afternoon, traders said, but rallied late in the day.

CRH put in a strong performance, rising more than 2.2 per cent to close at €25.21 per share. The company is being linked with possible bids for assets in India and Australia.

Troubled minerals company Kenmare Resources fell more than 7.5 per cent, though on relatively small volumes. A single bearish seller was active in the market in the morning, pushing it down by more than 20 per cent at one stage, before it recovered somewhat later in the afternoon.

London

After the announcement on bank balance sheets, HSBC fell back 5.8p to 432.5p, the Royal Bank of Scotland slipped 2.9p to 220.7p, while Standard Chartered dropped 1.1p to 439.5p.

But budget airline easyJet rose 24p to 1525p as its shares also bounced back from last week’s heavy falls following the Brussels terror attacks. The carrier was a strong blue chip riser thanks to a broker upgrade.

Housebuilders were among the biggest risers, as the Bank of England also restricted its intervention in the housing market to a crackdown on buy-to-let lending. Berkeley Group was up 75p to 3267p, while Taylor Wimpey rose 3.8p to 190.6p.

Irn Bru fizzy drink maker AG Barr fell slightly as it said it would move away from sugary drinks in light of the surprise levy on high-sugar beverages proposed by the Chancellor. The firm, which also makes Tizer and Snapple, also said its annual pre-tax profits lifted by 7 per cent in a “difficult” UK market.

Europe

Portuguese banks BPI and Millennium BCP fell 6.7 and 6.8 per cent respectively after Spain’s Caixabank and Angolan investor Isabel dos Santos failed to reach an agreement on their holdings in BPI.

Volkswagen slipped 1.6 per cent after a report that it may suspend its dividend as it copes with the fallout of a diesel-emissions scandal.

Dutch insurer and financial services company NN Group gained 1.5 per cent as HSBC put it on its “Europe Super 10” list.

New York

Eight of the 10 major S&P sectors were higher heading into the afternoon. The S&P financial sector fell 0.31 per cent. Shares of banks, which stand to gain from higher interest rates, were the biggest drags on the S&P.

Bank of America was down 2.3 percent, while Wells Fargo, JPMorgan and Citigroup declined more than 1 per cent.

A 2 per cent fall in crude prices weighed on the energy sector, which was down 0.68 per cent.

Soon after Yellen's speech, the Dow Jones Industrial Average added 47.56 points, or 0.3 per cent, to 17,582.95, wiping out a drop of more than 100 points. The Nasdaq Composite Index increased 0.9 per cent as Apple and Microsoft rallied more than 1.7 percent.

In currencies, the dollar fell to its lowest level against the euro in six days. In commodities, Brent crude oil fell 3.1 per cent to $39.04 a barrel and US crude lost 3.2 per cent to $38.15. Both cut the decline to near 2 per cent shortly after Ms Yellen’s prepared remarks hit the wires.

(Additional reporting: Reuters/Bloomberg/PA)