GLOBAL MARKETS-Stocks hit 2-yr highs, dlr pressured before Fed

                                
 By Tamawa Desai
                                
 LONDON, Nov 3 (Reuters) - World stocks hit a two-year high
on Wednesday while emerging equities rose to their highest level
since mid-2008 as investors anticipated more U.S. monetary
easing would support the global economy.
                                
 The U.S. Federal Reserve will announce its policy decision
later on Wednesday. Markets have priced for the Fed to initially
commit to buying at least $500 billion in U.S. Treasuries over
five months although much uncertainty surrounds the scope and
pace of bond purchases.
                                
 MSCI world equity index <.MIWD00000PUS> rose as high as
320.42, bringing gains this year to nearly seven percent. 
                                
 The MSCI emerging equities index <.MSCIEF> hit its highest
since June 2008, as the prospect of further U.S. quantitative
easing drives investors towards higher-yielding assets.
                                
 U.S. stock futures rose <SPc1>, signalling a firmer open on
Wall Street while European equities were 0.4 percent higher on
the day <FTEU3>.
                                
 "If they deliver a policy, which at the very least is in
line with the consensus and potentially offers some hope of a
greater eventual number being reached, then you have got your
short term catalyst for this market to go up," said Ian
Richards, European equity strategist at RBS. 
                                
 "The more, as a policy maker, you can do to reduce the cost
of capital, the more you increase the likelihood that the
corporate sector will start to invest. I would be optimistic
that it's an incremental positive in terms of real economic
prospects."
                                
 Market reaction to Republicans' victory in the U.S. midterm
elections was relatively muted as investors have largely priced
in the outcome and shifted focus to the Fed meeting.
                                
 U.S. Treasuries also extended gains in European trading as
market participants anticipated the Fed resuming asset
purchases. The T-note future <TYv1> rose by as much as 8/32 on
the day to a one-week high of 126-26/32.
                                
 The dollar remained under pressure, with the dollar index
down 0.1 percent at 76.623 <.DXY>.
                                
 "There is uncertainty over the details of the Fed
announcement but ultimately QE leads to lower yields and should
mean the dollar goes down in the long-term," said Adrian
Schmidt, currency strategist at Lloyds Banking Group.
                                
 The Fed is expected to announce its decision at around 1815
GMT. The U.S. central bank cut overnight interest rates to near
zero in December 2008 and has already bought about $1.7 trillion
in U.S. government debt and mortgage-linked bonds. 
                                
 With the prospect of a long period of ultra-low returns in
the United States, investors have flocked to emerging markets,
pushing those currencies higher.
                                
 The Bank of Japan, which meets on Thursday and Friday, is
also poised to launch a new round of bond buying.
[ID:nTOE6A0098] The European Central Bank and Bank of England
also meet this week, but are not expected to make any changes to
policy for the time being.
                                
 U.S. crude oil prices climbed to a six-month high above $84
for a second straight session <CLc1>.
(Additional reporting by Atul Prakash and Neal Armstrong;
editing by Patrick Graham)