* Corporate earnings also lift U.S., European stocks
* Oil jumps after big U.S. stock drawdown
* Dollar gains; September rate hike still possible (Adds close of U.S. market)
By Herbert Lash
NEW YORK, July 29 (Reuters) - Global equity markets rose on Wednesday, lifted by strong U.S. and European corporate earnings and a Federal Reserve statement that said the U.S. economy continues to strengthen, adding to expectations an interest rate hike is getting closer.
Fed officials said they felt the U.S. economy had overcome a first-quarter slowdown and was "expanding moderately" despite a downturn in the energy sector and headwinds from overseas. ID:nL1N1092AW
The Fed left its key interest rate, which has remained near zero for almost a decade, unchanged as expected. The Fed has said it will raise rates once it sees a sustained recovery.
"The Fed is taking baby steps towards a rate hike," said Brian Jacobsen, chief portfolio strategist at Wells Fargo (NYSE:WFC) Funds Management in Menomonee Falls, Wisconsin.
"The Fed is doing a good job getting people ready for a rate hike before year's end, making it likely to be a low-impact event," he said.
Advancing issues listed on the New York Stock Exchange outnumbered declining ones by almost 3 to 1, while Nasdaq-listed advancing issues slightly outnumbered declining issues.
With more than half of second-quarter results now reported, analysts expect overall earnings of S&P 500 companies to edge up 0.8 percent and revenue to decline 3.9 percent, according to Thomson Reuters data.
Shares of General Dynamics (NYSE:GD) GD.N hit a record high, gaining 3.9 percent after the company said it saw a rebound in demand for its Gulfstream business jets. The shares led a sector-wide rally for major aerospace stocks. ID:nL1N1091JF
The Dow Jones industrial average .DJI closed up 121.12 points, or 0.69 percent, to 17,751.39. The S&P 500 .SPX added 15.32 points, or 0.73 percent, to 2,108.57 and the Nasdaq Composite .IXIC gained 22.53 points, or 0.44 percent, to 5,111.73.
MSCI's all-country world stock index .MIWD00000PUS rose 0.67 percent, while the FTSEurofirst index .FTEU3 of leading European shares closed up 1.02 percent at 1,561.48.
In Europe, carmaker Peugeot PEUP.PA reported first-half net income for the first time in four years, boosting its shares 6 percent. Oil major Total TOTF.PA posted higher-than-expected second-quarter profits, and rose 2.6 percent. ID:nL5N1095C9
Merger activity also lifted shares, with Italcementi ITAI.MI surging 49 percent and HeidelbergCement HEIG.DE falling 6 percent after its takeover offer. ID:nL5N1084ZE
The dollar rose 0.28 percent at 123.90 yen JPY= , while the euro was down 0.64 percent at $1.0987. ID:nL1N10927Z
Higher U.S. Treasuries yields also supported the greenback, with the two-year yield US2YT=RR rising to 0.7038 percent. The benchmark 10-year U.S. Treasury note US10YT=RR fell 9/32 in price to yield 2.2823 percent. ID:nL1N1092FJ
Oil prices reversed early losses and rose after weekly data showed an unexpectedly large drawdown in U.S. crude inventories.
Data from the U.S. Energy Information Administration showed crude USOILC=ECI stocks fell by 4.2 million barrels last week, more than twenty times analysts' expectations for an decrease of 184,000 barrels. ID:nL3N1091GU
Front-month Brent futures LCOc1 rose 8 cents to settle at $53.38 a barrel. U.S. crude for September delivery CLc1 settled 81 cents higher at $48.79.