* U.S. stocks inch higher, though investors cautious
* U.S. presidential contest remains close
* Euro steady after hitting two-month low before Greece votes
* Bonds flat to lower; oil, gold prices firmer
NEW YORK, Nov 6 (Reuters) - World stock markets inched higher on Tuesday as investors awaited the results of a close U.S. presidential election, while the euro held steady despite uncertainty over Greece’s next financial aid payment.
Polls indicate the contest between President Barack Obama and Republican challenger Mitt Romney remained tight, although the Democratic incumbent has a slight edge in several key swing states. This uncertainty left investors in a cautious mood.
Traders’ most pressing worries concerning the presidential race and congressional contests across the 50 U.S. states is how the outcome will affect the U.S. government’s handling of the “fiscal cliff,” or $600 billion worth of automatic tax hikes and spending cuts set to kick in on Jan. 1.
This possible fiscal move could stun the world’s biggest economy into another recession, economists said.
“We do know this much, 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.” said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.
Shortly after the stock market opened, the Dow Jones industrial average was up 72.07 points, or 0.55 percent, at 13,184.51. The Standard & Poor’s 500 Index was up 5.87 points, or 0.41 percent, at 1,423.13. The Nasdaq Composite Index was up 5.19 points, or 0.17 percent, at 3,004.85. Top European shares rebounded 0.5 percent after Monday’s losses, boosted by strength in the technology and travel and leisure sectors.
World stocks on the MSCI global index were up 0.39 percent.
In addition to the U.S. elections, traders were monitoring developments in Greece, whose 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 from an IMF and EU bailout on hold for months.
There will be a follow-up vote on Sunday on an austerity budget for 2013.
“Suffice to say if the (Wednesday) 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 U.S. dollar at $1.2804 after it fell to a two-month low at $1.2764.
Given the bounce in the euro, the dollar retreated from a two-month high against a basket of major currencies. The dollar index last traded down 0.12 percent at 80.648.
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 5/32 in price to yield 1.696 percent, up 2 basis points from Monday. German Bund futures were flat at 142.18.
In commodity markets, Brent crude oil rose $1.07 to $108.80 a barrel and U.S. oil futures rose 47 cents at $86.12, tracking the modest rise in equities markets.
In line with the broader market’s caution, gold rose for a second day, up 0.3 percent to $1,689.49 an ounce.