* Fed likely to keep rates steady
* US stocks pull back after rally
* Dollar advances ahead of Fed statement (Changes byline, dateline to NEW YORK; updates throughout)
By Chuck Mikolajczak
NEW YORK, Nov 8 (Reuters) - World equity markets edged lower on Thursday, with U.S. stocks opening on the defensive while the U.S. dollar strengthened ahead of a monetary policy announcement by the Federal Reserve.
U.S. shares modestly fell in the wake of Wednesday's post-election rally of more than 2 percent. Those gains came as investors celebrated political gridlock in the U.S. as Democrats took control of the House of Representatives after the midterm congressional vote, while Republicans maintained control of the Senate.
A spate of weak earnings also gave investors reason for pause, with Qualcomm one of the biggest drags on the benchmark S&P 500 index, down nearly 7 percent as the loss of chip sales to Apple caused the company to cut its fourth-quarter outlook.
"It is definitely just a little profit taking from yesterday, the volume yesterday was not big, so I don’t think there was a lot of conviction in yesterday’s rally," said Tim Ghriskey, Chief Investment Strategist at Inverness Counsel in New York.
"There is some uncertainty about what Democrats are going to mean to the White House, whether that is going to have any impact on the deregulation that has occurred, taxes."
The Dow Jones Industrial Average was up 25.31 points, or 0.10 percent, at 26,205.10, the S&P 500 was down 3.43 points, or 0.12 percent, at 2,810.46 and the Nasdaq Composite was down 18.61 points, or 0.25 percent, at 7,552.23.
MSCI's gauge of stocks across the globe dipped 0.03 percent
European shares were poised to close modestly higher , led by banking shares following results from names such as SocGen and Commerzbank.
The dollar advanced ahead of the Fed policy statement, scheduled for 2 p.m. EST (1900 GMT), but there is little in recent economic data to alter plans for an interest rate increase in December and more to come next year.
Traders are currently see only a 7.2 percent chance the Fed will raise rates by a quarter-point at today's meeting, according to CME's FedWatch, down from 7.8 percent on Wednesday.
The dollar index was up 0.27 percent against a basket of major currencies, with the euro edged down 0.04 percent at $1.142.
Oil neared three-month lows, surrendering early gains as investors focused on global crude supply, which is increasing more quickly than many had expected.
U.S. crude fell 0.81 percent to $61.17 per barrel and Brent was last at $71.40, down 0.93 percent on the day.
The yield on benchmark 10-year Treasury notes was marginally higher at 3.2262 percent, which was still below the 7-1/2 year high of 3.261 percent set a month ago during a bond market rout.
Reporting by Chuck Mikolajczak; Editing by Bernadette Baum