World stocks up modestly ahead of US vote, Fed

World stocks mostly rose Tuesday as investors awaited the outcome of the U.S. midterm elections and the Federal Reserve's decision on how much it will pump into the U.S. economy to shore up the recovery.

In Europe, the FTSE 100 index of leading British shares was up 43.86 points, or 0.8 percent, at 5,738.48, while Germany's DAX rose 19.77 points, or 0.3 percent, to 6,624.63. The CAC-40 in France was 5.93 points, or 0.2 percent, higher at 3,847.04.

Wall Street was poised for modest gains later - Dow futures were up 22 points, or 0.2 percent, at 11,112 while the broader Standard & Poor's 500 futures rose 4.1 points, or 0.4 percent, to 1,187.20.

Stocks have been fairly buoyant so far this week, especially after strong manufacturing surveys in the world's two biggest economies - the U.S. and China - boosted hopes about the pace of the global recovery.

However, the forecast-busting report from the Institute for Supply Management has not altered expectations that the Fed will ease monetary policy further on Wednesday given subdued U.S. inflation and high unemployment.

Though figures last week showed the U.S. economy grew at a slightly faster than anticipated annualized rate of 2 percent in the third quarter, that is still not enough to bring down unemployment, which is hovering near 10 percent to the frustration of the Obama administration.

The consensus in the markets is that the central bank will announce monthly asset purchases of around $100 billion a month over the next six months at the conclusion of its two-day meeting on Wednesday.

Before the Fed statement, the markets will have the results of the Congressional elections in the U.S. to digest.

If opinion polls are correct, President Barack Obama will have to work with a Republican-dominated House of Representatives at the very least. Many think that's a recipe for policy inaction over the coming two years before the next presidential elections, meaning the Fed will have to play an even more crucial role in sustaining the U.S. economy.

"Obama's ability to pass legislation during the remainder of his term is set to be seriously hampered," said Jane Foley, an analyst at Rabobank International. "While this is usually a negative for market confidence, there is a view in the market that this may not be the case this time."

In currencies, the Australian dollar jumped more than one U.S. cent to briefly trade above $1 after the central bank jacked up its key interest rate in a surprise move. Policymakers are aiming to ward off higher inflation as Australia's economy booms amid strong Asian demand for iron ore and other minerals.

Earlier in Asia, markets mostly advanced.

Japan's benchmark Nikkei 225 stock index rose 5.26 points, or 0.1 percent, to close at 9,159.98 and South Korea's Kospi gained 0.2 percent to 1,918.04.

Hong Kong's Hang Seng index added 0.1 percent to 23,671.42 and Chinese shares edged lower on profit-taking amid worries over possible shifts in monetary policy to counter excess liquidity - the benchmark Shanghai Composite Index closed 0.3 percent lower at 3,045.43.

India's main stock market in Mumbai fell after India's central bank raised its key interest rates by a quarter point to contain persistently high inflation amid strong economic growth.

Australia's S&P/ASX 200 eked out a 0.1 percent gain to 4,701.40 despite the Reserve Bank of Australia's surprise decision to raise its main interest rate by a quarter of a percent to a two-year high of 4.75 percent.

There was far more of a reaction in the currency markets - the Australian dollar briefly traded above parity against the dollar in the wake of the decision. By late morning London time, the Australian dollar was 1.1 percent at $0.9977.

Elsewhere, the euro was 0.5 percent higher at $1.3966 while the dollar was 0.4 percent firmer at 80.81 yen.

All eyes in the currency markets remain centered on the Fed and what it is planning to do - though the prospect of more dollars in the financial system has been a boon to stocks over the last few weeks, the dollar has tanked.

The dollar slumped to 80.21 yen early Monday, hovering near a post-World War II record low of 79.75 yen set in 1995.

Benchmark oil for December delivery was up 41 cents at $83.36 a barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $1.52 to settle at $82.95 on Monday.

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Associated Press' Pamela Sampson in Bangkok contributed to this report.