* Worries about extent of QE dominate
* Dollar rises as Japan warns about intervention
* Stocks weak, Wall Street set for losses
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 26 (Reuters) - Second thoughts about the outcome of the next Federal Reserve meeting weakened stocks and steadied the dollar's decline on Tuesday, underlining how crucial the prospect of more Fed asset-buying has become to financial markets.
Wall Street looked set to open lower.
MSCI's all-country world stock index was down a third of a percent with its emerging market sub-index sustaining a small loss.
The dollar was up nearly 0.2 percent against a basket of major currencies.
After no major policy initiatives emerged from the Group of 20 finance ministers' meeting over the weekend, investors had renewed selling the dollar, expecting it to fall with the advent of more quantitative easing (QE) from the Fed.
QE essentially involves printing more money, so a flood of dollars on the market would debase the currency's value.
But some investors have begun worrying that the market consensus for a big burst of QE may be overdone. This has been backed up by comments from some Fed officials.
Kansas City Fed President Thomas Hoenig called more asset buys by the central bank a "very dangerous gamble". New York Fed President William Dudley said the U.S. economic context would determine whether an incremental or big bang approach to asset purchases was better.
"The dollar is in a bit of a holding pattern. The market is still mulling over the U.S. QE story and dollar selling is a bit less of a one-way bet than it was," said Jeremy Stretch, currency strategist at CIBC.
The dollar also rose around 0.4 percent against the yen to 81.09 yen after Japanese Finance Minister Yoshihiko Noda said Japan would take decisive steps on the exchange rate when needed, a not-too-subtle reminder about intervention.
The euro lost a quarter of a percent to fall below $1.40.
Meanwhile, the prospect of more QE from the Bank of England was also called into question by data showing the UK economy grew 0.8 percent in the third quarter, bringing year-on-year growth to 2.8 percent -- the fastest annual rate in three years.
HEADWINDS FOR STOCKS
European equities fell on both uncertainty about QE and comments from ArcelorMittal that the basic resources sector faced extended weakness.
"We had a rally since August and now people are waiting to see whether this quantitative easing is going to come through or not. There are still some uncertainties and the market is going to be range-bound until the meeting of the Fed," said Koen De Leus, strategist at KBC Securities, in Brussels.
The Fed meets next on Nov. 2-3.
ArcelorMittal, the world's largest steelmaker, predicted a far weaker-than-expected fourth quarter due to muted demand, lower prices and higher raw material costs.
The overall result was to drag the FTSEurofirst 300 down 0.4 percent.
Earlier, Japan's Nikkei closed down 0.3 percent, with exporters still in focus because of the strong yen.
U.S. stock index futures pointed to a lower open on Wall Street with Texas Instruments Inc in focus after it warned, despite expectation-beating earnings, that its fourth-quarter revenue will be hurt by slowing demand for chips for computers and televisions. (Additional reporting by Jessica Mortimer and Atul Prakash; Editing by Ruth Pitchford)