U.S. vote in focus, euro slips on Greece

European equities edged higher on Tuesday helped by stronger travel and technology stocks but no major moves were expected until investors have the results of the U.S. election.

Uncertainty over Greece's next aid payment pushed the euro to a two-month low. China's new leadership team, to be unveiled this month, was also a market focus.

Polls indicate the election between President Barack Obama and Republican challenger Mitt Romney remains an extremely close call and the uncertainty left markets in a cautious mood.

"Everybody is waiting on the U.S. election, people are waiting on (leadership transition) China and also on what happens in Greece where it is incredibly important that it gets this new money," said ABN Amro economist Aline Schuiling.

World stocks on the MSCI global index were up 0.25 percent by 1145 GMT and top European shares were up 0.6 percent as both clawed back some of Monday's falls.

European technology shares were the top sectoral gainers, led by buying of chip designer ARM. Travel and leisure stocks also advanced 0.9 percent as InterContinental Hotels said it was looking to sell one of its top New York hotels.

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 from an IMF and EU bailout that has been on hold for months.

"We are seeing investors getting disillusioned about the euro zone, the positive factor from the ECB's plan to buy bonds is fading and that is fundamentally weighing on the euro," said Neil Mellor, currency strategist at Bank of New York Mellon.

"There isn't much progress on when Spain will seek a bailout and now we have the Greek vote. 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."

The euro fell to a two-month low of $1.2785, versus the dollar before some mid-morning buying trimmed the losses.

DATA WOES

Data from Europe also continued to highlight the region's economic problems.

The European Central Bank and the Bank of England both meet on Thursday. Neither is expected to cut rates or provide further policy stimulus although Tuesday's data may cause concern.

German industrial orders fell more than forecast in September as demand from its euro zone neighbors faltered.

The euro zone's services PMI for October was also revised down slightly while new business, expectations and employment continued to contract sharply signaling that activity could remain muted.

In Britain, retail sales slowed rapidly, industrial production fall 1.7 percent month-on-month and a fall in house prices accelerated.

"Given the stabilization in financial markets, and in consumer sentiment indicators in some countries, we thought perhaps you would see some stabilization in the (euro zone) PMIs," said HSBC economist Janet Henry.

FISCAL CLIFF IN FOCUS

U.S. stock index futures pointed to a higher open on Wall Street, with the S&P 500, Dow Jones and Nasdaq 100 indicated up 0.2 percent ahead of the opening bell and the start of voting.

Whatever the outcome of presidential race, financial markets are expected to remain fixated on U.S. politics in the coming months. After the election, Congress must deal with a "fiscal cliff", of up to $600 billion in expiring tax and spending reductions that could damage the world's most powerful economy.

German government bonds were steady having rallied on Monday.

"There doesn't seem to be massive positioning either way before the election," said one London-based bond trader.

"The feeling is that if Obama wins, it's going to be fairly dovish from the Fed point of view but I'm not sure we're going to see major moves either way," he said.

Risk-aversion kept the dollar near a two-month high against a basket of major currencies.

Oil and gold prices were both little changed, with Brent oil in a tight range at just under $108 a barrel and gold creeping to $1,691.46 an ounce as it rebounded from a two-month low in the previous session.

In Asian trading, the MSCI index of Asia-Pacific shares outside Japan ended the day up 0.5 percent despite a 0.4 percent dip by Japan's Nikkei.

Australian shares rose 0.2 percent and the Aussie dollar hit a five week high after the country's central bank surprised by keeping rates on hold.

(Additional reporting by Reporting by Kirsten Donovan and Anirban Nag; editing by Anna Willard)