GLOBAL MARKETS-Stocks falter ahead of Fed meeting, dollar down

* U.S. housing data supports mkts, Fed dominates sentiment

* Dollar weakens against major currencies

* Euro zone bond sales go well (Updates with U.S. markets, changes byline, dateline, previous LONDON)

By Manuela Badawy and Jeremy Gaunt

NEW YORK/LONDON, Sept 21 (Reuters) - World stocks ticked upward and the dollar fell broadly on Tuesday as investors braced for a Federal Reserve meeting that may discuss whether the fragile U.S. economy needs a fresh infusion of cash.

U.S. stocks faltered as the market pulled back after recent strong gains, though upbeat housing data helped support sentiment. U.S. government bond prices rose, supported by hopes the Federal Reserve will retain, or even consider enhancing, its accommodative monetary stance.

News that U.S. housing starts increased more than expected in August to their highest level in four months, and that permits for future home construction also rose, prompted Treasuries to trim some of their early gains.

"Bonds shaved some gains because the housing numbers were better than expected," said Gary Thayer, chief macrostrategist at Wells Fargo Advisors in St. Louis, Missouri. "Some signs of stability in one of the more troubled sectors of the economy could mean that the Fed will decide today they don't need to become more accommodative."

The focus of the day however, is the Fed's regular meeting. There was little expectation of any firm moves from the policymakers, but, as ever, the wording of their statement would be key.

At issue is how close the stumbling U.S. economy is to requiring the return of quantitative easing -- effectively printing money to buy mortgage bonds and securities.

The Fed is expected to tread water, with a renewed promise to keep its portfolio from shrinking but no new steps to ease its monetary policy.

The central bank acknowledged in August the U.S. recovery had lost momentum and Fed Chairman Ben Bernanke said it would renew efforts to stimulate growth if the outlook soured appreciably. The Fed is expected to issue a statement at about 2:15 p.m. EDT (1815 GMT). For details, see [ID:nSGE68J04M]

"The Fed is likely to keep neutral and when they do, the market will move up. But it would need a lot more volume than what we saw yesterday to see a jump above another technical range," said Tom Schrader, managing director of U.S. equity trading at Stifel Nicolaus Capital in Baltimore.

The Dow Jones industrial average <.DJI> was down 11.09 points, or 0.10 percent, at 10,742.53. The Standard & Poor's 500 Index <.SPX> was down 1.76 points, or 0.15 percent, at 1,140.95. The Nasdaq Composite Index <.IXIC> was down 6.51 points, or 0.28 percent, at 2,349.32.

World stocks as measured by MSCI<.MIWD00000PUS> were up 0.04 percent while the pan-European FTSEurofirst 300 firmed 0.06 percent.

"Investors are waiting on the sidelines. Yesterday the market went up in anticipation that the Fed can do something about the economy, but I think people are ignoring the macroeconomic condition," said Koen De Leus, economist at KBC Securities in Brussels.

Earlier, Japan's Nikkei <.N225> hit a seven-week intraday high of 9,704.25 but ended down 0.3 percent or 23.98 points at 9,602.11.

DOLLAR DOWN

The euro was up half a percent at $1.3133, also supported by solid demand at euro zone debt sales in some of the troubled peripheral economies, some of which have been looking to be heading into crisis again.

What had been increasing pressure on peripheral euro zone debt eased, meanwhile, with an Irish bond auction going smoothly and a successful sale of Greek T-bills.

Greece sold 390 million euros ($512 million) of 3-month T-bills at an average yield of 3.98 percent, down from 4.05 percent in a previous July 20 sale. Overseas investors bought 72 percent, a sign of relative confidence.

Ireland sold 1.5 billion euros in an auction of 2014 and 2018 bonds, at the top of its target range. Yields -- 4.767 percent and 6.023 percent respectively -- were well below those seen for the bonds on secondary markets on Monday.

"Very strong auctions from Greece and Ireland. This along with the spread tightening we've seen this morning and the strong bid-cover ratios means this funding round for Ireland, and Greece, has been passed convincingly," said Peter Chatwell, rate strategist at Credit Agricole in London.

Against the Japanese yen, the dollar was down 0.39 percent at 85.35 from a previous session close of 85.680.

Meanwhile, U.S. Treasury debt prices were higher on hopes the Fed will retain its accommodative monetary stance.

The benchmark 10-year U.S. Treasury note was up 7/32, with the yield at 2.6791 percent. The 2-year U.S. Treasury note was up /32, with the yield at 0.4601 percent. The 30-year U.S. Treasury bond was up 10/32, with the yield at 3.8536 percent.

In energy and commodities prices, crude oil fell $1.03, or 1.38 percent, to $73.83 per barrel on concerns over the outlook for the global economy and ahead of its expiry later on Tuesday. Spot gold prices fell $1.35, or 0.11 percent to $1275.50 as the market consolidated after three days of record highs. (Additional reporting by Ellen Freilich, Angela Moon and Vivianne Rodrigues in New York, Editing by Chizu Nomiyama)