* U.S. Midwest business activity contracts in April; US dollar falls * Fall in euro zone inflation adds to rate cut case * Oil drops on growth worries By Caroline Valetkevitch NEW YORK, April 30 (Reuters) - Stocks on major markets edged higher on Tuesday while the U.S. dollar fell to a two-month low on expectations of further supportive actions by U.S. and European central banks. Investors await the release of the Federal Reserve's policy statement on Wednesday as well as the European Central Bank's announcement on Thursday. Investors believe the Fed will continue with its bond buying program in response to recent weaker U.S. economic data, while the European Central Bank may cut its benchmark interest rate. U.S. Treasuries prices erased gains, as investors made room for a six-part debt sale by Apple Inc. The technology company has attracted more than $50 billion in orders for a six-part debt sale expected to price later on Tuesday, according to two market sources. U.S. stocks were slightly higher after data showing an unexpected contraction in business activity in the U.S. Midwest was offset by a report showing U.S. home prices rose in February at their fastest rate in almost seven years. At the same time, the U.S. dollar was being driven by views on the Fed as investors watch to see if the sluggish economic recovery and slowing inflation could not only end talk of slowing the Fed's bond-buying, but also push the Fed into buying more assets. Weakness in the dollar "is mainly speculation on further Fed quantitative easing policy," said Ulrich Leuchtmann, head of FX research at Commerzbank. "The view that the Fed would scale down QE is coming more and more under question due to poor U.S. data." The dollar index, which measures its value against a basket of six major currencies, earlier hit its lowest since the end of February at 81.598. It was last down 0.5 percent at 81.729. The euro rose as high as $1.3185, the strongest since April 17. On Wall Street on Tuesday, the Dow Jones industrial average was down 9.96 points, or 0.07 percent, at 14,808.79. The Standard & Poor's 500 Index was up 0.64 points, or 0.04 percent, at 1,594.25. The Nasdaq Composite Index was up 10.54 points, or 0.32 percent, at 3,317.56. U.S. stocks have mostly rallied since the start of the year. The S&P 500 closed at a record high on Monday. MSCI's world equity index was up 0.3 percent, while the pan-European FTSEurofirst 300 index ended down 0.2 percent. Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.1 percent to a seven-month high. In the U.S. Treasury market, the benchmark 10-year U.S. Treasury note was down 2/32, with the yield at 1.6734 percent. Apple is issuing three-year and five-year fixed and floating-rate notes, as well as 10-year and 30-year fixed-rate notes via Deutsche Bank and Goldman Sachs. The company is expected to issue at least $15 billion in debt. EUROPEAN DATA WEAK; US DATA MIXED Data out of Europe on Tuesday bolstered views the ECB will cut interest rates when it meets on Thursday. Inflation in the euro zone hit a three-year low and unemployment rose to a record high, the EU statistics office reported. Adding to worries, German retail sales unexpectedly fell in March while Spain's economy shrank for the seventh straight quarter in the first three months of the year. "It's looking more and more likely that the European Central Bank will indeed cut its main refinancing rate on Thursday while the Federal Reserve will stand pat on Wednesday," said Brian J. Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin. A cut in the ECB benchmark rate by 25 basis points to a record low of 0.5 percent after its policy meeting on Thursday has been largely factored in by financial markets, though many analysts and dealers still harbor some doubts it will happen. Only a narrow majority of 76 economists polled by Reuters last week forecast a 25 basis point cut in the main rate to 0.5 percent on Thursday. A separate survey of money market dealers showed they were evenly split on any move. In the commodity markets the growth concerns, heightened by the recent run of weak economic data around the world, largely outweighed the hopes of further central bank support. Brent crude dropped $1.46 to $102.35 a barrel. U.S. crude was $1.01 lower at $93.49 a barrel.