NEW YORK (Reuters) - World stock markets rose on Tuesday as American voters went to the polls, with the U.S. presidential election keeping trade subdued, while the euro held steady despite uncertainty over Greece's next financial aid payment.
Polls indicated President Barack Obama and Republican challenger Mitt Romney remained in a neck-and-neck race, although the Democratic incumbent has a slight edge in several key swing states.
Traders are focused on how the outcome will affect the U.S. government's handling of the "fiscal cliff," the $600 billion worth of automatic tax hikes and spending cuts set to kick in on January 1 unless Congress takes action.
Economists have said the spending cuts and tax hikes could ignite a new recession in the world's biggest economy, while Europe continued to struggle with a prolonged debt crisis that has hurt regional growth.
There is no clear consensus in financial markets on whether Obama or Romney could reach a timely deal with leaders of the opposing party to avoid the fiscal cliff.
"We do know this much," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey. "Though the resident in the White House may change, the face of Washington is still going to be one of tremendous gridlock, discord and dysfunction, and markets are going to force Washington to come to terms with the dysfunction."
The winner will also decide who will head the Federal Reserve. There has been speculation Ben Bernanke, whose tenure expires in January 2014, might not want to serve another term. Romney has said he will not reappoint Bernanke as Fed Chairman.
"If Obama wins, we would be certain Ben Bernanke would remain in office as Federal Reserve chairman at least until his normal term expires," said Peter Fertig, a consultant with Quantitative Commodity Research in London.
On below-average volume at noon, the Dow Jones industrial average was up 152.26 points, or 1.16 percent, at 13,264.70. The Standard & Poor's 500 Index was up 13.01 points, or 0.92 percent, at 1,430.27. The Nasdaq Composite Index was up 17.51 points, or 0.58 percent, at 3,017.17.
Express Scripts Holding Co (ESRX.O) plunged 13.6 percent to $54.30 and was the biggest drag on the Nasdaq after the pharmacy benefits manager said analysts' forecasts for its 2013 results were too aggressive, casting doubt on how well it is integrating its $29 billion purchase of Medco Health Solutions Inc.
Emerson Electric Co (EMR.N) climbed 2.7 percent to $51.85 after the industrial conglomerate posted adjusted earnings that topped Wall Street expectations and said it will pursue a sale of its $1.4 billion embedded computing and power business.
Top European shares provisionally closed 0.6 percent higher, rebounding from Monday's losses, boosted by strength in the technology and travel and leisure sectors.
Hannover Re (HNRGn.DE), the world's third-biggest reinsurer, rose 4.5 percent at 55.90 euros after its quarterly profit beat forecasts and it lifted its expectations for 2012 and 2013.
World stocks on the MSCI global index were up 0.76 percent after back-to-back losing sessions.
Developments in Greece were also being keenly followed. The Greek parliament will vote on Wednesday on 13.5 billion euros of fresh spending cuts and tax hikes that are crucial to unlocking 31.5 billion euros in aid. There will be a follow-up vote on Sunday on an austerity budget for 2013.
"Suffice to say if the vote fails, the euro will drop and the dollar will rally, but even if the vote passes, any rally in the euro will be short-lived," said Neil Mellor, currency strategist at Bank of New York Mellon in London.
The euro recovered against the dollar at $1.2817, little changed on the day, after the single currency fell to a two-month low at $1.2764.
The dollar retreated from a two-month high against a basket of major currencies. The dollar index last traded down 0.18 percent at 80.607.
In the bond market, U.S. Treasuries prices dipped and German government debt held steady after racking up safe-haven gains on Monday tied to uncertainty about the U.S. election.
Benchmark 10-year Treasury notes were down 7/32 in price to yield 1.703 percent, up 2 basis points from Monday. German Bund futures were flat at 142.04.
In commodity markets, Brent crude oil rose $1.73 to $109.46 a barrel and U.S. oil futures rose $1.20 at $86.85, tracking gains in equities markets.
Gold was poised for its biggest one-day gain since late September, although it was hovering near a nine-week low set on Monday. Bullion was about 0.8 percent higher at $1,697.69 an ounce.
(Additional reporting by Chuck Mikolajczak in New York; Marc Jones, Kirsten Donovan and Airban Nag in London; Editing by James Dalgleish and Leslie Adler)
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