(Updates prices, changes lead, headline, updates bullets)
* Treasury yields rise further on possible December Fed "liftoff"
* U.S. GDP softer than expected
* Wall Street edges lower
By David Gaffen
NEW YORK, Oct 29 (Reuters) - Stock markets around the world fell and bond yields rose as investors weighed the implications that a U.S. interest rate rise before the end of the year would have for 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. urn:newsml:reuters.com:*:nL1N12R2IF
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.
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. urn:newsml:reuters.com:*:nW1N12F00G
The benchmark 10-year Treasury yield rose 7 basis points to 2.16 percent US10YT=RR . The two-year note's yield was 0.73 percent, highest since late September.
The Dow Jones industrial average .DJI fell 32.98 points, or 0.19 percent, to 17,746.54, the S&P 500 .SPX lost 1.42 points, or 0.07 percent, to 2,088.93 and the Nasdaq Composite .IXIC dropped 12.32 points, or 0.24 percent, to 5,083.38.
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. urn:newsml:reuters.com:*:nLNNTLEBHB
In Europe the pan-European FTSEurofirst 300 index .FTEU3 was down 0.2 percent at 1,481 points. Earlier in Asia, Japan's Nikkei share average .N225 gained 0.2 percent to close at 18,935.71.
Many investors are still not convinced about a rate 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 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 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. urn:newsml:reuters.com:*:nL8N12M20T urn:newsml:reuters.com:*:nL3N12N405
The dollar gave back its earlier gains, with the euro trading 0.4 percent higher on the day at $1.0966 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. urn:newsml:reuters.com:*:nL3N12T1FV
U.S. crude CLc1 rose 0.4 percent to $46.11 a barrel. Brent LCOc1 was steady at $49.05. Spot gold XAU= fell 2 percent to $1,150 an ounce.