European shares rose towards 29-month highs on Wednesday while the dollar came under modest pressure despite a rate hike, and reassuring words, from the Federal Reserve. After raising its key rate by 25 basis points to 2.25 percent late on Tuesday, the Fed said the U.S. economy was in good shape and expressed confidence that inflation could be contained. Benchmark 10-year euro zone government debt yields hit 17-1/2 month-lows after the Fed stuck to its "measured" rate tightening pace and offered no surprises in the accompanying statement. Comparable U.S. yields were steady at 4.13 percent after strong overnight gains in New York. "People were fearing that the Fed could be hawkish but it has been moderate," said Charles Berry, trader at LBBW in Stuttgart. "The 25 basis point hike was expected, so the moderate tone of the comments are more important. Treasuries gained and we are following that." Oil pushing past $42 reminded investors of risks ahead, but the upbeat economic mood was bolstered by Japan's tankan corporate sentiment survey. This showed that confidence had cooled but crucially forecast an increase in capital spending to give shares and the yen a lift. --More 1813 Local Time 1513 GMT
