* World stocks near 2-yr high on positive economic data
* US stocks up on expected Republican congressional gains
* Dollar falls broadly, oil and bond prices higher (Updates with European stock market close)
By Walker Simon
NEW YORK, Nov 2 (Reuters) - World stocks neared a 2-year high on Tuesday after stronger-than-expected economic data while the dollar fell as investors anticipated the U.S. central bank will open the money spigot to spur the flagging U.S. economy.
U.S. stocks also got a boost from investors' expectations of strong Republican gains in Congress halfway through the term of Democratic U.S. President Barack Obama. Shares in sectors such as healthcare, deemed likely to benefit from the rebalancing of power, advanced.
In campaigns, Republicans accused Democrats of stifling business with regulations and failing to extend tax cuts, while Democrats countered with claims that Republicans blocked economic recovery programs.
"I think it is people trying to get in front of what they think will be the election results," said Rick Meckler, president of investment firm LibertyView Capital Management in New York, in reference to expectations of Republicans' gains.
The dollar fell against a basket of major currencies, with the U.S. Dollar Index <.DXY> down 0.78 percent. A drop in the greenback makes dollar-denominated commodities, including oil, cheaper for non-U.S. investors. U.S. crude oil futures gained 1.2 percent to nearly $84 a barrel.
European equities hit a six-month closing high on Tuesday, lifted by energy companies after the price of oil rose.
Euro-zone manufacturing picked up its pace last month, a business survey showed Tuesday, one day after better-than-expected U.S. and Chinese factory data increased optimism about the global economy and revived risk appetite. For details, see [ID:nLDE6A10TX]
"From a global perspective, the growth outlook looks solid and that's feeding some appetite for risk," Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said.
The euro traded above $1.40, buoyed by the European economic data. But traders doubted the euro would be able to stay above this level, with uncertainty over the extent of the Fed's asset purchases. The Fed announcement is expected on Wednesday at the end of a two-day policy meeting.
Markets have priced in Fed asset buying of $100 billion a month for five months in an attempt to bring long-term interest rates evem lower and stimulate a sluggish U.S. economy.
SIZE MATTERS
The program's size is key. A larger-than-expected program of asset buying, which has been described as printing money, would weigh on the dollar and boost commodity prices, while a smaller round of purchases could curb investors' appetite for risk.
The MSCI world equity index <.MIWD00000PUS> rose 0.87 percent to 319.54, a whisker shy of the two year-high of 319.84 hit on Oct. 25.
The FTSEurofirst 300 <.FTEU3> index of top European shares rose 0.6 percent to end the day provisionally at 1,093.96 points, its highest close since late April.
On Wall Street, the Dow Jones industrial average<.DJI> advanced 77.61 points, or 0.70 percent, to 11,202.23. The Standard & Poor's 500 Index <.SPX> rose 9.53 points, or 0.80 percent, to 1,193.91. The Nasdaq Composite Index <.IXIC> climbed 24.65 points, or 0.98 percent, to 2,529.49.
Most gains came from sectors expected to benefit from a rebalancing of power in the U.S. Congress. Among those expected to thrive if Republicans regain control of Congress are the health insurers, a sector hurt by the Democrats' push to reform healthcare. Republicans have vowed to repeal the healthcare reform law.
On Monday, a Reuters/Ipsos poll found Republicans are poised to take control of the House, gaining at least 50 seats, but they are unlikely to win a majority in the Senate.
In foreign currency trade, the euro
Against the Japanese yen, though, the dollar
U.S. light sweet crude oil
Spot gold
Prices of U.S. Treasuries climbed on talk about the size
of the Fed's expected bond-buying program. The benchmark
10-year U.S. Treasury note
The 30-year U.S. Treasury bond
In Asian trading hours, Japan's broad-based Topix index fell to its lowest in 19 months on Tuesday as the yen's strength against the dollar earlier in the day hurt exporters' shares. The Topix <.TOPX> dipped 0.02 percent to end at 803.12, a 19-month low, while the benchmark Nikkei <.N225> inched up 0.06 percent to end at 9,159.98, off a seven-week low. (Reporting and writing by Walker Simon; Additional reporting by Angela Moon and Gertrude Chavez-Dreyfuss in New York and Natsuko Waki in London; Editing by Jan Paschal)