By Herbert Lash
NEW YORK (Reuters) - Global equity markets edged higher on Wednesday as the Federal Reserve reinforced investor views that the U.S. economy shows signs of strength despite weak data for the first quarter, while oil prices fell on record-high U.S. inventories.
On Wall Street, the Dow industrials ended at a new closing high, buoyed by the Fed's outlook.
The Dow Jones Wall Street initially slid after the Commerce Department said U.S. gross domestic product expanded at a 0.1 percent annual rate in the first quarter, the slowest pace since the fourth quarter of 2012.
But stocks rebounded as investors took into account an economy hit by an unusually cold and disruptive winter, and as other data pointed to an upturn in the second quarter.
The Fed, in its policy statement released at the close of its two-day meeting, looked past the dismal GDP reading and gave a mostly upbeat assessment of the U.S. economy's prospects as it announced another cut in its massive bond-buying stimulus.
"What the Fed is saying is ignore this first quarter number, it's not reflective of the underlying strength in the economy," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
The Fed continues to urge people to be less risk averse, said Phil Camporeale, client portfolio manager at J.P. Morgan Asset Management in New York.
"A statement like this is a green light, in our opinion, to continue to put money to work in developed market equities,” Camporeale said.
Evidence the second quarter will be stronger included parts of the GDP report, a better-than-expected reading on U.S. Midwest business activity in April, and strong numbers on private-sector hiring, said Art Hogan, chief market strategist at Wunderlich Securities in New York.
The ADP National Employment Report showed private employers added 220,000 jobs in April, after increasing headcount by 209,000 in March.
The Institute for Supply Management-Chicago business barometer, which measures business activity in the Midwest, was 63.0. That topped the forecast of economists for a reading of 56.7.
MSCI's all-country world index rose 0.26 percent to 414.18. In Europe, the pan-regional FTSEurofirst 300 rebounded to close flat, up a mere 0.03 point at 1,352.45.
The Dow Jones industrial average closed up 45.47 points, or 0.27 percent, to 16,580.84. The S&P 500 gained 5.6 points, or 0.3 percent, to 1,883.93, and the Nasdaq Composite added 11.013 points, or 0.27 percent, to 4,114.556.
Twitter shares fell 8.6 percent to $38.97, after hitting a record low at $37.25, a day after quarterly results showed lackluster user and usage growth.
Oil fell toward $108 a barrel with stocks in the United States at a record high on a steep increase in the Gulf Coast region, and prospects for higher exports from Libya.
U.S. total commercial crude stocks rose 1.7 million barrels to just under 400 million barrels, the largest volume on records going back to August 1982.
Gulf coast oil stocks rose by 5.7 million barrels to just over 215 million, also the highest level on record.
Brent crude for June delivery settled down $1.03 to $108.07 a barrel. June U.S. crude settled down $1.54 at $99.74 a barrel.
The weak first-quarter read on the U.S. economy sent the dollar careening lower against the euro and the yen.
U.S. short-term interest rate futures rose as traders pared bets the Fed would raise the federal funds rate in the first half of next year in the wake of the weak GDP report.
The June 2015 federal funds contract implied traders now see a 47 percent chance of a Fed rate hike at the end of June 2015, down from 53 percent at Tuesday's close.
Inflation increased in the euro zone, albeit more slowly than expected, according to data on Wednesday. While the door is open for the European Central Bank to print money in a bid to boost economic activity, given that inflation is running below target, the data dampened slightly the expectation of any imminent action.
The euro was off an earlier three-week low to trade up 0.43 percent to $1.3871.
U.S. Treasury yields fell in choppy trading on the GDP data.
Yields on benchmark 10-year notes and 30-year bonds dropped to session lows. The benchmark 10-year U.S. Treasury note was up 11/32 in price to yield 2.6532 percent.
(Reporting by Herbert Lash; Additional reporting by Rodrigo Campos in New York; Editing by Leslie Adler)