* European shares up after Fed statement
* Dollar gives up some gains but close to recent highs
* Forthcoming U.S. data key for Dec rate hike odds
(Recasts, updates with European opening)
By Anirban Nag
LONDON, Oct 29 (Reuters) - European shares rose, while the
U.S. dollar stood near 2 1/2 month highs against the euro on
Thursday, after the Federal Reserve gave a vote of confidence to
the U.S. economy and revived expectations it may raise interest
rates by year-end.
The Fed, which kept its rates on hold as expected, took the
unusual step of strengthening its language about timing in its
statement, bringing a December rate hike back on the table.
ID:nL1N12R2IF
In another hawkish tilt, the Fed also took out a warning
about slowing global growth, going against earlier speculation
that China's cooling economy could delay a rate hike in the
United States. As a result, money market futures 0#FF: are
pricing in about a 50 percent chance of a rate hike in December,
compared to around 30 percent previously.
"I think when it comes to it, the markets will be able to
cope just fine with a rate hike as it will suggest that the
economy is recovering well and showing strong resilience at a
time when other countries are really struggling," said Craig
Erlam, senior market analyst at Oanda, London.
The pan-European FTSEurofirst 300 index .FTEU3 was up 0.3
percent at 1,489.45 points by 0811 GMT, while Japan's Nikkei
share average .N225 gained 0.2 percent to close at 18,935.71.
That came after Wall Street ended a volatile session with
solid gains, underpinned by the Fed's vote of confidence in the
U.S. economy. The Fed's relatively upbeat stance came despite
recent worries about global growth due to a slowdown in China.
In overnight trade, U.S. Treasury yields and the dollar rose
while shares initially sold off and then reversed, after the Fed
explicitly referred in its statement at the end of its two-day
policy meeting, to conditions necessary "to raise the target
range at its next meeting." Reference to a particular meeting is
rare for the Fed. urn:newsml:reuters.com:*:nW1N12F00G
"There is no doubt an earlier move may give the markets
greater clarity and more confidence," said Chris Brankin, chief
executive officer of TD Ameritrade Asia in Singapore. "However,
focusing on the timing is feeding uncertainty."
EYES PEELED FOR U.S. DATA
Many investors are still not convinced about a lift-off
given a recent run of soft U.S. data, making economic releases
in coming weeks, starting with the advance reading of U.S. GDP
due later on Thursday, more crucial in determining the a
December move.
Economists also expect a key U.S. manufacturing index due on
Monday USPMI=ECI to show the first contraction in the sector
in 2-1/2 years, which would not be conducive for a rate hike.
The dollar fell 0.3 percent to 120.77 yen JPY= after
spiking as high as 121.26 on Wednesday. It held its ground
against the euro, though, trading at $1.0930 EUR= , having
skidded to a 2-1/2 month low of $1.0826 overnight.
The Fed's stance is in contrast to the ECB and other major
central banks, a factor that will underpin the dollar.
The European Central Bank last week signalled its readiness
to inject more stimulus to boost prices and the People's Bank of
China followed with its sixth interest rate cut in less than a
year. urn:newsml:reuters.com:*:nL8N12M20T urn:newsml:reuters.com:*:nL3N12N405
Crude oil futures fell, although they retained most of their
gains after soaring more than 6 percent overnight as the U.S.
government reported an inventory build-up, which triggered a
short-covering rally after three days of losses. O/R
U.S. crude CLc1 fell 1 percent to $45.56 a barrel. Brent
LCOc1 slipped 1.3 percent to $48.40.
Spot gold XAU= ticked up to $1,160.76 an ounce, after
skidding more than 1 percent in the previous session in the wake
of the Fed's hawkish message.