NEW YORK / LONDON – Equity markets rose and the dollar slid on Monday as investors burnished hopes the US economy is slowing enough to allow the Federal Reserve to ease its aggressive hiking of interest rates.

US stocks rallied as investors weighed the outcome of Tuesday's mid-term elections. Voting will determine whether the Republicans are strong enough to take over Congress and likely underline the difficult prospects for Democrats.

"On a day-to-day basis the market focuses on the headlines and what's coming up immediately ahead of us, and that's the elections," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The major indices in Europe mostly closed higher, with the exception of the FTSE 100 in London, while Wall Street rallied in late trading after a choppy early session.

MSCI's all-country world index gained 1.14 percent, and the broad pan-European STOXX 600 index rose 0.33 percent.

On Wall Street, the Dow Jones Industrial Average rose 1.31 percent, the S&P 500 gained 0.96 percent and the Nasdaq Composite advanced 0.85 percent.

While a divided Congress is typically viewed as good for markets, the hope the US economy is losing enough momentum for the Fed to slow the pace of monetary tightening pushed the dollar lower, said Joe Manimbo, senior market analyst at Convera in Washington.

"The market is really desperate for the Fed to pivot," Manimbo said. "It will take anything it can get in terms of signs of a softening economy to hold out hope that a pivot might materialize sooner rather than later," he said.

Slower inflation on the heels of signs in Friday's US employment report for October showing that the labor market is cooling would be positive for risk appetite and negative, at least over the short term, for the dollar, Manimbo said.

The euro rose 0.61 percent to $1.0021 and the Japanese yen strengthened 0.01 percent against the dollar at 146.60.

The relatively strong US jobs report last week ensured the Fed will be in no rush to ease policy, though the pace of rate hikes may slow as the US central banks keeps rates higher for longer, a view that pressured Treasury yields higher.

Median forecasts call for annual US inflation to slow to 8.0 percent and for the core to dip a tick to 6.5 percent.

The yield on two-year notes , which typically moves in step with rate expectations, rose 7 basis points at 4.722 percent, while the 10-year yield was up 6 basis points at 4.218 percent.

Oil prices rose to more than a two-month high.

US crude fell 82 cents to settle at $91.79 a barrel, while Brent settled down 65 cents at $97.92 a barrel.

Gold prices steadied near a three-week peak hit on Friday, buoyed by a weaker dollar as investors awaited the CPI report that could influence the Fed's interest rate policy.

Bitcoin fell 0.55 percent to $20,791.00.