* FTSEurofirst 300 ends up 1.3 percent
* Yellen comments lift global equities
* Germany's Metro surges on demerger plans
* Steelmakers rise on consolidation hopes (ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development) Adds closing prices)
By Sudip Kar-Gupta
LONDON, March 30 (Reuters) - European shares rose on Wednesday after Federal Reserve Chair Janet Yellen called for caution in raising U.S. interest rates, while German retailer Metro surged on demerger plans.
The pan-European FTSEurofirst 300 index closed up 1.3 percent. Germany's DAX gained 1.6 percent and the euro zone's blue-chip Euro STOXX 50 index rose 1.3 percent.
The FTSEurofirst is still down around 7 percent since the start of 2016, however, on concerns about a China-led global economic slowdown.
That threat was one reason Yellen said on Tuesday the Fed should proceed only cautiously to raise interest rates .
Yellen's comments showed how efforts by the Fed and European Central Bank to keep rates low were hitting returns on bonds and cash, said Hampstead Capital hedge fund manager Lex Van Dam, and pushing investors towards the better returns from stocks.
"Equity markets remain supported by the global central banks - the economy might not be in great shape, but with real rates in negative territory, there are not many other places to find a return," Van Dam said.
Yellen's comments weakened the U.S. dollar on currency markets. That in turn supported the shares of mining and energy companies since a weaker dollar makes commodities cheaper for investors using other currencies.
Steelmakers rose after Tata Steel said it wanted to leave the British market, sparking hopes of a European consolidation. Shares in ThyssenKrupp were up 8.3 percent, ArcelorMittal 3.6 percent and Outokumpu 6.5 percent.
Metro jumped 11.5 percent after it proposed splitting itself in two, with its wholesale and food business transferred in one entity and consumer electronics remaining part of the existing company.
Premier Foods rose 4.4 percent after the British food maker agreed to hold talks with McCormick & Co. The U.S. company raised its takeover proposal for a second time.
Today's European research round-up
ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will still be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.
If you have any thoughts, suggestions or feedback on this, please email email@example.com. Mike Dolan, Markets Editor EMEA.
Additional reporting by Danilo Masoni; Editing by Gareth Jones