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World stocks gain as focus turns to Fed stimulus

World stocks gain as focus turns to Fed stimulus

Stock markets were slightly higher Wednesday as investors prepared for the Federal Reserve's expected plans to stimulate the world's biggest economy by expanding the money supply.
With the results of the midterm U.S. elections, in which the Republicans gained control of the House, offering few surprises, traders turned their attention to the Fed's announcement later in the day.
The central bank is expected to reveal additional purchases of government-backed bonds, creating new dollars to lower market interest rates, boost credit and economic growth. The size and duration of the program will be key to investors' reactions.
In Europe, Britain's FTSE 100 was up 0.1 percent to 5,760.14. France's CAC-40 was up 0.3 percent to 3,875.98, and Germany's DAX rose 0.1 percent to 6,662.04.
Asian markets closed mostly higher and Wall Street was edged up on the open _ the Dow was higher at 11,148 while the Standard & Poor's 500 was up at 1,193.10.
Investors took in stride U.S. midterm congressional elections, which put Republicans _ riding a wave of voter discontent over America's economic woes _ in control of the House. President Barack Obama's Democratic Party retained control of the Senate, where Republicans from the anti-tax, anti-spending Tea Party movement won at least two seats.
The divided government was a sign that fights over taxes, deficits, health care and financial regulation were looming and could result in paralyzing uncertainty for the world's No. 1 economy. But investors seem to have already factored that outcome into stock prices.
The key issue is whether the two parties can work together, analysts at Bank of America Merrill Lynch said in a report.
"A popular Wall Street adage is that "gridlock is good" because it keeps the government from implementing new policies that further intervene in the private economy," the report said. "However, the short-term gridlock is very bad for the outlook, in our view."
With the election results clear, investors turned their attention to the outcome of the Fed's policy meeting Wednesday. The central bank is expected to announce the details of its plan to stimulate the economy by buying bonds. The plan, known as quantitative easing, makes stocks a more attractive investment by lowering bond yields.
Investors have been anticipating that the central bank's program will tally at least $500 billion. Any number significantly higher or lower than that figure could affect stock prices.
Broad stock market indexes have gained 12 percent since the Fed began hinting in late August that it would undertake the bond buying program by the end of the year. Over the last month, the Dow Jones industrial average is up 3.3 percent, and the broad Standard and Poor's 500 Index is up 4.1 percent.
Stocks were also given a small lift by payroll company ADP's report, which said private employers added 43,000 jobs last month _ more than expected _ after cutting jobs in September. The figure is used as an indicator ahead of the actual payrolls figure released Friday.
Markets will also keep an eye out for a report on growth in the services sector due later Wednesday.
In China, shares fell amid renewed signs that authorities may take further action to curb inflation. The benchmark Shanghai Composite Index lost 0.5 percent to 3,030.99. The Shenzhen Composite Index for China's smaller, second exchange fell 1.8 percent to 1,309.41.
"After the interest rate hikes in Australia and India on Tuesday, investors are fretting that China's central bank will likely raise interest rates again within this year," said Wen Lijun, an analyst at Nanjing Securities, in Nanjing.
In a quarterly report issued late Tuesday, China's central bank signaled it is likely to pull back further from stimulus policies meant to counter the fallout from the global financial crisis.
Among Asian shares closing higher was Hong Kong's Hang Seng index, which climbed 2 percent to 24,144.67.
South Korea's Kospi rose 1 percent and Australia's S&P/ASX 200 climbed 0.5 percent.
Indexes in Singapore, Malaysia and the Philippines were also higher while Taiwan and Indonesia fell. Markets in Japan were closed for a public holiday.
Benchmark crude for December delivery was up 93 cents at $84.83 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 95 cents to settle at $83.90 a barrel on Tuesday.
In currencies, the dollar rose to 81.22 yen from 80.64 yen in New York late Tuesday. The euro slid to $1.4024 from $1.4030.
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AP writers Pamela Sampson in Bangkok, David K. Randall in New York and AP researcher Ji Chen in Shanghai contributed to this report.