World stocks post muted gains before US elections

[November 02, 2010]  BANGKOK (AP) -- World stocks mostly posted muted gains Tuesday as investors awaited the outcome of the U.S. midterm elections and the Federal Reserve's two-day meeting amid speculation over stimulus programs.

Oil prices rose above $83 a barrel as stronger manufacturing in the world's two biggest economies -- the U.S. and China -- boosted optimism that demand for crude will improve.

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.

Investors and businesses are mainly turning their attention to U.S. midterm elections, which are expected to result in a Congress at least partially controlled by Republicans pitted against the Democratic administration of President Barack Obama. Fights over taxes, deficits, health care and financial regulation could result in paralyzing uncertainty for the world's No. 1 economy.

Investors also were anticipating a Fed announcement of a new program of buying Treasury bonds as early as Wednesday in a bid to stimulate the flagging U.S. economy.

Britain's FTSE 100 was headed higher in early trading, up 0.4 percent to 5,718.17. Germany's DAX gained 0.1 percent to 6,610.80 while France's CAC-40 was down 0.1 percent to 3,838.77.

Wall Street was set to open higher, with Dow futures up 14 points, or 0.1 percent, to 11,104.

Markets mostly posted marginal gains in Asia.

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 Australia's S&P/ASX 200 eked out a 0.1 percent gain to 4,701.40.

Markets in Taiwan and Indonesia fell while those in Singapore, New Zealand, Malaysia and the Philippines rose.

Mumbai's index slid into negative territory amid a decision by India's central bank to raise key interest rates by a quarter point to contain persistently high inflation amid strong economic growth.

Chinese shares, meanwhile, edged lower on profit-taking amid worries over possible shifts in monetary policy to counter excess liquidity.

The benchmark Shanghai Composite Index lost 0.3 percent to 3,045.43. The Shenzhen Composite Index for China's smaller, second market dropped 0.6 percent to 1,333.29.

News of improved manufacturing growth boosted U.S. stocks early Monday, but Wall Street was unable to hold on to the gains.

The Dow Jones industrial average closed almost flat ahead of the outcome of Tuesday's U.S. congressional elections and the Fed's policy meeting on Nov. 2-3. The Dow was up just 6.13 points, or 0.1 percent, to 11,124.62.

The growth in U.S. manufacturing reflected demand at home and abroad for cars, computers and other goods. A separate report on Monday showed that manufacturing in China, the world's second-largest economy, also grew.

Analysts said the report by the Institute for Supply Management suggests that U.S. manufacturing was beginning to reap the benefits of a weak dollar, which helps boost American exporters by making U.S. goods cheaper overseas.

In currencies, the euro rose to $1.3950 from $1.3897 in New York late Monday. 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. In Tokyo on Tuesday, the dollar crawled back to 80.58 yen.

Benchmark oil for December delivery was up 43 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.

[Associated Press; By PAMELA SAMPSON]

AP researcher Ji Chen in Shanghai contributed to this story.

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