* 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.
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.
"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 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.
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.
U.S. crude CLc1 fell 1 percent to $45.56 a barrel. Brent LCOc1 slipped 1.3 percent to $48.40.
Spot gold 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.