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LONDON (Alliance News) - Stock markets around the world rallied on Friday, after US Federal Reserve Chair Janet Yellen eased market concerns by saying the Fed remains on track to raise US interest rates by year's end, as she expects the US labour market and economy to continue to improve.

An upward revision to US economic growth in the second quarter seemed to bear out that confidence.

The FTSE 100 index closed up 2.5% at 6,109.01 points and ended a turbulent week - which saw it slip below 6,000 points for the first time in September - up 0.1%. The FTSE 250 index underperformed the blue-chip index ending up 1.7% at 16,799.87 and closing down 0.9% over the course of the week. The AIM All-Share index ended the day up 0.6% at 732.87.

Equity markets in Asia also ended largely higher, with the Nikkei in Tokyo closing up 1.8% and the Hang Seng in Hong Kong rising 0.4%, but the Shanghai Composite shedding 1.6%.

European stock indices posted the strongest gains, with the CAC 40 index in Paris ending up 3.1% and the DAX 30 in Frankfurt up 2.8%. European carmakers, which had been feeling the effects of the Volkswagen emissions scandal, closed higher Friday, with BMW, Renault, Peugeot and Volkswagen all up, though still well down on the week.

UK-listed catalytic converter maker Johnson Matthey, which also had been hit by the scandal, closed as one of the best performers in the FTSE 100, up 5.2%.

On Wall Street at the London close, the Dow Jones Industrial Average traded up 1.2%, the S&P 500 was up 0.8% and the Nasdaq Composite traded up 0.6%, reacting to Yellen's speech, which was delivered after US market close Thursday.

Speaking at the University of Massachusetts at Amherst, she said the Fed is likely to begin tightening monetary policy in a "timely fashion and at a gradual pace".

"If the [Federal Open Market Committee] were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting its goals," Yellen said, adding that an abrupt tightening would risk disrupting financial markets and could even push the economy into recession.

The central banker also said she believes that inflation will return to the Fed's 2.0% target over the next few years as the temporary factors that are currently weighing on inflation wane.

The remarks came a week after the Fed left interest rates near zero yet again. The move left investors confused about when the long-anticipated interest rate hike - the first in nearly a decade - was likely to happen. The Fed's next interest rate decision is scheduled for October 28.

Michael Hewson, chief market analyst at CMC Markets, said that the equity market response to Yellen's speech suggested that investors are starting to get used to the idea of a nominal move higher in US rates, interpreting it as a vote of confidence in the US economic recovery.

"For several years now we've become accustomed to the sight of equity markets rising on the back of a central bank easing monetary policy expectations, not tightening them," Hewson said. "As far as the Federal Reserve is concerned that particular play book is starting to change after the market reaction to last night’s speech by Federal Reserve Chair Janet Yellen where she gave strong indications that a rate rise in 2015 remained very much a consideration for a lot of members on the FOMC."

Economic data in the US remained supportive of a Fed rate hike, after US economic growth was revised higher for the second quarter.

Updated government data showed that the gross domestic product expanded at a revised rate of 3.9% in the second quarter. This was revised up from the 3.7% growth estimate which was reported last month. The second quarter saw a strong rebound from the first three months of the year, when the economy shrank by 0.2%. Growth was fuelled by higher consumer spending and increased business investment.

On the London Stock Exchange, ARM Holdings closed as the best FTSE 100 performer, up 6.0%, with major customer Apple expected to report record first weekend sales for the latest in its iPhone series, the iPhone 6S and iPhone 6S Plus, which went on sale Friday. Last year the company breached 10 million in sales of the iPhone 6 and 6 Plus within three days of its September 2014 launch. Apple confirmed early last week it was on track to beat last year's record.

Glencore shares ended as one of the few FTSE 100 fallers, down 0.2%, having touched a new record low of 95.00 pence earlier in the session. The multi-commodities miner's share price had spiked towards the close, before subsequently ending lower, after a Bloomberg report said Glencore has hired two banks to sell a minority stake in its agricultural business in a deal that could value the whole division at USD12 billion.

Bloomberg said that "a person familiar with the situation" revealed that the multi-commodities miner and trading house has hired Citigroup Inc and Credit Suisse Group AG to organise the sale, adding that it is in talks with about a dozen sovereign wealth funds and Asia-based trading houses. It is likely to sell the stake to a group of funds of trading houses rather than to a single party.

Glencore's entire market capitalisation is GBP13.71 billion.

In the FTSE 250, shares in Synergy Health sprinted ahead by more 40% after its takeover by US-based STERIS cleared a major hurdle, when the Federal Trade Commission's attempt to block the takeover was thwarted by a US district court ruling.

This means the USD1.9 billion cash and share takeover deal, which had been delayed due to the FTC's actions, can now move ahead.

Synergy agreed to the GBP19.50 a share takeover offer in October of last year and had originally hoped to close the deal in the first quarter of 2015. However, the deal was initially delayed due to requests for information on the deal from the FTC, and in May the FTC informed the companies it intended to block the deal as a result of concerns relating to competition in the market for contract radiation sterilisation services.

N+1 Singer said the acquisition "represents a very attractive exit for what has been a huge success story." The broker kept a Buy recommendation on Synergy Health, and a price target of 1,912 pence. It said that at STERIS's current price, the offer is worth up to 2,379 pence per Synergy share.

Synergy closed up 43% at 2,257.80 pence.

In a US-heavy economic calendar on Monday, there are US personal income, consumption and expenditure data at 1330 BST, pending home sales at 1500 BST and the Dallas Fed manufacturing business index at 1530 BST. There also are speeches by Federal Reserve Bank of Chicago President Charles Evans at 1830 BST and Federal Reserve Bank of San Francisco President John Williams at 2200 BST.

In the UK corporate calendar Monday, there is a trading update from FTSE 250-listed water utility and waste management company Pennon Group. Regeneration and strategic land company MJ Gleeson releases full-year results, as does microwave electronic products and wireless telecommunications infrastructure company Filtronic and AIM-listed Max Petroleum. Camco Clean Energy releases interim results.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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