* MSCI world equity index up 0.4 pct at 238.57
* U.S. vote eyed; Congress majority for Democrats also key
* Oil rises; dollar slips
By Natsuko Waki
LONDON, Nov 4 (Reuters) - World stocks hit a two-week high
on Tuesday as investors shifted their focus to the U.S.
presidential vote while they anticipated aggressive interest
rate cuts from European central banks this week.
Democrat Barack Obama holds a decisive edge over Republican
John McCain in national opinion polls. Trends in the race could
become clear soon after the first polls begin to close at 2300
GMT in Indiana.
Democrats are also expected to expand their majorities in
both chambers of Congress. Obama has proposed an economic
stimulus plan that some experts estimate could cost as much as
$190 billion. A sweeping Democrat victory would make it easier
for the new administration to fight the credit crisis.
"Investors are marking time ahead of the elections, gearing
up for all the drama," said Bernard McAlinden, strategist at NCB
Stockbrokers in Dublin.
"A clear mandate either way is the important thing for
equity markets. There is the implicit notion that things were
not right anyway, and my impression is that people want someone
with the energy to change things, including markets."
MSCI world equity index <.MIWD00000PUS> rose 1.2 percent
while Europe's FTSEurofirst 300 index <> gained 2 percent.
Asian stocks <.MIAP0000PUS> rose 0.3 percent.
Australia's central bank became the latest to cut interest
rates, slashing the benchmark rate by a bigger-than-expected 3/4
point to 5.25 percent, the lowest since March 2005.
Australia's surprise move has boosted expectations that
central banks in the euro zone and Britain which meet later this
week could also aggressively lower the cost of borrowing.
The dollar <.DXY> fell around 0.7 percent against a basket
of major currencies.
CRISIS FIGHTERS
The election comes as a recent run of weak data and earnings
reports reinforced the view major economies are in recession as
market turmoil hurts corporate profits and consumer consumption.
Democrats need to gain nine Senate seats to reach a 60-seat
majority that would give them the muscle to defeat Republican
procedural hurdles.
"We think an Obama victory will eventually prove negative
for the dollar because it is likely to lead to more expansive
fiscal policy and a more protectionist-minded White House,"
Barclays Capital said in a note to clients.
"But in the short-term, an Obama victory, combined with a
strong majority in the Senate, is likely to be bullish for the
USD, as it will enable Washington to respond more proactively on
the management of the financial crisis.
Sentiment is already improving in some markets. In the money
market, the spread between U.S. official and market rates
narrowed to 240 basis points, a level not seen since late
September.
Emerging stocks <.MSCIEF> rose 0.9 percent on the day.
U.S. crude oil <CLc1> rose 2.2 percent to $65.27 a barrel
after industry sources said Saudi Arabia had already made
substantial cuts in supplies. Oil was still way below its record
high above $147 set in July.
Gold rose to $732.05 an ounce <XAU=>.
The December bund futures <FGBLc1> was steady on the day.
(Additional reporting by Sitaraman Shankar; Editing by
Victoria Main)
