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NEW YORK (Reuters) - Global equity markets rose on Wednesday and European shares hit eight-year highs on a $70 billion takeover bid by Royal Dutch Shell, while U.S. shares pared gains after the largest U.S. crude inventory build in 14 years slammed oil prices.
U.S. Energy Information Administration data showed stockpiles of U.S. crude surged nearly 11 million barrels last week in their largest weekly build since March 2001.
The dollar rebounded after the Federal Reserve released minutes of its March policy meeting. The Fed opened the door for a June rate hike, even though some policy-makers were willing to wait until next year.
Trade in Wall Street stocks was volatile after the release of the minutes, though stocks steadied and remained higher after an initial dip in the Dow.
"They left a very balanced tone in the market. A few of them were happy to wait til 2016, which is significant, and the fact that they are still debating June was a bit of a hawkish sign," Aaron Kohli, interest rate strategist at BNP Paribas in New York, said of the Fed minutes.
Shell's bid for energy firm BG Group, the first major merger in the sector in more than a decade, boosted European shares. Energy shares, which had tumbled on the plunge in oil and gas prices since last summer, rallied as the deal drove expectations that the sector could see further consolidation.
The STOXX energy sector index in Europe rose as much as 6.1 percent before closing up 2.45 percent. The pan-European FTSEurofirst 300 index finished down 0.04 percent to 1,611.68, hurt by a fall in Germany's DAX as auto stocks fell and a decline in Greek equities ahead of a deadline for Greece to repay a loan.
Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey, said Shell's bid is a big deal for a hard-hit sector that has been the weakest part of the equity market. But U.S. energy shares lagged; super-majors Exxon Mobil and Chevron closed down 2.0 percent and 1.7 percent, respectively.
"What people are really waiting for are earnings, which either will give support for the next level or lead to a sell-off of sorts," Meckler said.
The estimate for U.S. first-quarter corporate earnings growth is a negative 2.8 percent, according to Thomson Reuters data; excluding the energy sector, the earnings growth estimate is up 5.4 percent.
The Dow Jones industrial average closed up 27.09 points, or 0.15 percent, to 17,902.51. The S&P 500 gained 5.57 points, or 0.27 percent, to 2,081.9, and the Nasdaq Composite added 40.59 points, or 0.83 percent, to 4,950.82.
MSCI's all-country world index, which measures equity performance in 46 countries, rose 0.23 percent.
The greenback rose against leading currencies for a third session. The euro fell 0.25 percent against the dollar, to $1.0786, while the dollar index gained 0.22 percent to 98.043. The dollar remained lower against the yen, down 0.12 percent to 120.12.
Oil prices dropped as much as 6 percent after U.S. crude closed the previous session at its highest level this year, as the mammoth rise in U.S. stockpiles and news of record Saudi oil production wiped away speculation of a sustained recovery.
Brent May crude fell $3.55 to settle at $55.55 a barrel. May crude settled down $3.56 at $50.42 a barrel.
Nervous investors drove safe-haven German Bund yields close to record lows on concerns over Greece's ability to resolve its debt crisis.
German 10-year yields slid to 0.156 percent, just above a record low of 0.152 percent hit last week. Yields later rose to 0.164 percent.
U.S. government bond prices fell. The 10-year Treasury note was down 4/32 in price, pushing the yield up to 1.9073 percent.
Reporting by Herbert Lash; editing by Andre Grenon, Meredith Mazzilli and Leslie Adler