GLOBAL MARKETS-Stocks, commodities fall before Fed, dollar up

* Uncertainty over size of Fed economic stimulus

* Fed may buy few hundred billion dollars of bonds--WSJ

* Treasuries fall before third debt sale of week (Updates with U.S. markets' open, changes byline, dateline from LONDON)

By Manuela Badawy

NEW YORK, Oct 27 (Reuters) - Stocks and commodities fell and the dollar rose on Wednesday on doubts over how aggressively the Federal Reserve is going to attempt to stimulate the flagging U.S. economy.

U.S. government debt prices fell before the week's third sale of Treasuries.

Investors had been pricing in large-scale bond purchases by the Fed, which lifted equities, commodities and emerging market assets in recent weeks while the dollar fell because more Fed quantitative easing would lower the currency's value, at least in the short term.

"The dollar's slide since September has been pricing in aggressive price action by the Fed to around $1 trillion," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.

However, the Wall Street Journal said on Wednesday that the Fed is likely to unveil an asset-purchase program worth a few hundred billion dollars over several months. It said officials want to avoid a "shock and awe" approach when the announcement is expected next week. For details, see [ID:nTOE69Q02H].

"Some stabilization, Fed official comments and the Wall Street Journal article have resulted in investors' paring back those aggressive expectations. Given the price action, we can assume they are trimming those short dollar bets."

A Reuters survey on Oct. 8 showed U.S. primary dealers expected the size of the quantitative easing to be between $500 billion and $1.5 trillion.
For a survey on size of QE, click [ID:nNLL8LE6JH] For possible FOMC outcomes, click [ID:nN25168493]

The dollar was up against major currencies, with the U.S. Dollar Index <.DXY> up 0.49 percent at 78.089.

The euro was down 0.61 percent at $1.3775. Against the Japanese yen, the dollar was up 0.36 percent at 81.69.

WORLD STOCKS, COMMODITIES PRESSURED

The uncertainty over the size and pace of quantitative easing dampened equities and commodity prices.

The Dow Jones industrial average <.DJI> was down 108.45 points, or 0.97 percent, at 11,061.01. The Standard & Poor's 500 Index <.SPX> was down 10.27 points, or 0.87 percent, at 1,175.37. The Nasdaq Composite Index <.IXIC> was down 9.73 points, or 0.39 percent, at 2,487.56.

"People care more about quantitative easing than anything else today," said Michael O'Rourke, chief market strategist at BTIG LLC in New York.

"The Fed lowering what it could do should put some pressure on the risk assets that have been trading with QE as a catalyst."

World stocks measured by MSCI All-Country World Index <.MIWD00000PUS> fell 1.38 percent and MSCI emerging market benchmark <.MSCIEF> lost 1.89 percent.

Tokyo's Nikkei average <.N225> added 0.1 percent, helped by a softer yen.

Europe's FTSEurofirst 300 <.FTEU3> fell 0.8 percent after data showed new orders for long-lasting U.S. manufactured goods fell when transportation equipment was excluded.

U.S. Treasuries widened losses on news that sales of new U.S. single-family homes rose more than expected in September, while prices rose and the supply of homes on the market was the lowest in 42 years.

The benchmark 10-year U.S. Treasury note was down 11/32, with the yield at 2.685 percent. The 2-year U.S. Treasury note was down 1/32, with the yield at 0.4025 percent. The 30-year U.S. Treasury bond was down 18/32, with the yield at 4.0351 percent.

Gold prices fell $14.75, or 1.10 percent, to $1324.60 an ounce as the dollar rose. Gold typically falls when the dollar strengthens, and vice versa, as a firmer U.S. unit curbs the metal's appeal as an alternative asset. Like all dollar-priced commodities, it also becomes more expensive for other currency holders.

Crude oil fell $1.46, or 1.77 percent, to $81.09 per barrel. (Additional reporting by Nick Olivari, Ellen Freilich, and Lean Schnurr in New York, and Dominic Lau in London; Editing by Kenneth Barry)