Stocks gain on Royal Dutch Shell bid, oil slumps

NEW YORK (Reuters) - Global equity markets rose on Wednesday, with European shares hitting eight-year highs on a $70 billion takeover bid by Royal Dutch Shell , but shares pared gains after the largest U.S. crude inventory build since 2001 slammed oil prices.

Equity markets briefly sold off after 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, but stocks steadied after paring gains that briefly pushed the Dow lower. The meeting concluded with the Fed opening the door to a June rate hike, but some policy-makers were willing to wait until next year.

?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," said Aaron Kohli, interest rate strategist at BNP Paribas in New York.

Shell's bid for energy firm BG Group , the first major merger in the sector in more than a decade, boosted European shares as energy stocks that had tumbled on the plunge in oil and gas prices since last summer rallied.

The STOXX energy sector index <.SXEP> in Europe, which rose as much as 6.1 percent, closed up 2.45 percent, while the pan-European FTSEurofirst 300 index <.FTEU3> of leading regional shares fell 0.04 percent to 1,611.68.

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, with super-majors Exxon Mobil and Chevron down 1.8 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 blended estimate for U.S. first-quarter corporate earnings growth is a negative 2.8 percent, according to Thomson Reuters data, but excluding the energy sector, the earnings growth estimate is up 5.4 percent.

The Dow Jones industrial average <.DJI> rose 29.22 points, or 0.16 percent, to 17,904.64. The S&P 500 <.SPX> rose 5.92 points, or 0.29 percent, to 2,082.25 and the Nasdaq Composite <.IXIC> added 37.11 points, or 0.76 percent, to 4,947.35.

MSCI's all-country world index <.MIWD00000PUS>, which measures equity performance in 46 countries, rose 0.26 percent.

The greenback initially fell but rebounded after the release of the Fed minutes. The euro retreated against the dollar, falling 0.17 percent to $1.0795 while the dollar index <.DXY> gained 0.13 percent to 97.958. The dollar remained lower against the yen , down 0.2 percent to 120.02.

Oil prices dropped as much as 6 percent after U.S. crude closed the previous session at its highest 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.

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, with the yield on the 10-year Treasury note down 2/32 in price, pushing their yield up 1.9021 percent.

(Reporting by Herbert Lash; editing by James Dalgleish, Andre Grenon and Meredith Mazzilli)