* 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 [].
"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 []
For possible FOMC outcomes, click []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The dollar was up against major currencies, with the U.S.
Dollar Index <.DXY> up 0.49 percent at 78.089.
The euro <EUR=> was down 0.61 percent at $1.3775. Against
the Japanese yen, the dollar <JPY=> 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 <> 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 <> 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 <> added 0.1 percent, helped by
a softer yen.
Europe's FTSEurofirst 300 <> 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 <US10YT=RR> was
down 11/32, with the yield at 2.685 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 1/32, with the yield at
0.4025 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 18/32, with the yield at 4.0351 percent.
Gold prices <XAU=> 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 <CLc1> 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)
