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* Treasury yields rise further on possible December Fed
"liftoff"
* U.S. GDP softer than expected
* Wall Street lower
By David Gaffen
NEW YORK, Oct 29 (Reuters) - Stock markets around the world
and the U.S. dollar fell on Thursday as investors weighed the
negative implications that a U.S. interest rate rise before the
end of the year would have on the global economy and markets.
The Federal Reserve, which kept its rates on hold as
expected on Wednesday, took the unusual step of strengthening
its language about timing in its statement, making it clear that
a December rate hike was still possible. The Fed also removed a
previous warning about slowing global growth.
Wall Street was lower, giving up some of Wednesday's gains.
The U.S. stock market initially reacted negatively to the Fed
statement, but later reversed course to end near the day's highs
on Wednesday.
The MSCI All-Country World Index .MIWD00000PUS has
recovered most of the losses that occurred beginning in
mid-August on worries about slowed worldwide demand and the
Fed's plans. It was last down 0.6 percent on Thursday.
The Dow Jones industrial average .DJI fell 49.67 points,
or 0.28 percent, to 17,729.85, the S&P 500 .SPX lost 2.48
points, or 0.12 percent, to 2,087.87 and the Nasdaq Composite
.IXIC dropped 13.66 points, or 0.27 percent, to 5,082.03.
The first estimate of third quarter U.S. growth, released on
Thursday, showed the world's biggest economy expanded at a 1.5
percent annualized pace, below the expected 1.6 percent. But
economists expect growth to pick up in the fourth quarter, given
strong consumer spending figures.
In Europe the pan-European FTSEurofirst 300 index .FTEU3
was down 0.5 percent at 1,477 points. Earlier in Asia, Japan's
Nikkei share average .N225 gained 0.2 percent to close at
18,935.71.
U.S. Treasury yields continued Wednesday's rise 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.
The benchmark 10-year Treasury yield rose 7 basis points to
2.16 percent US10YT=RR . The two-year note's yield was 0.72
percent, highest since late September.
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 more crucial in determining a December move.
Economists expect a key U.S. manufacturing index due Monday to show the first contraction in the sector in 2-1/2
years, which would not be conducive for a rate hike.
The Fed's stance contrasts to the European Central Bank and
other major central banks, a factor that is expected to underpin
the dollar. The Fed and ECB hold policy decisions within two
weeks of each other in December.
The ECB 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.
The dollar gave back its earlier gains, with the euro
trading higher on the day at $1.0950 EUR= , having skidded to a
2-1/2 month low of $1.0826 overnight.
Crude oil futures were slightly higher one day after soaring
more than 6 percent as the U.S. government reported an inventory
build.
U.S. crude CLc1 rose 0.4 percent to $46.13 a barrel. Brent
LCOc1 gained 2 cents to $49.07. Spot gold fell 2
percent to $1,150 an ounce.