Stock markets rallied Thursday and the dollar slid against the euro and pound as US election uncertainty reigned ahead of a key Federal Reserve update.

The knife edge US presidential race has tilted toward Joe Biden, with Democrat wins in Michigan and Wisconsin bringing him close to a majority.

But President Donald Trump claimed he was being cheated and has gone to court to try and stop vote counting.

"Likely Republican control of the Senate should put paid to increased corporate regulation and taxation while a new administration in the White House may well dial down tensions with other global superpowers on issues like trade," noted AJ Bell investment director Russ Mould.

"This certainly seemed to be the thinking in Asia overnight as Japanese and Chinese equities staged substantial rallies."

Europe picked up the baton by extending strong gains won Wednesday that were seen also on Wall Street.

Hopes for a new economic rescue package out of Washington provided support to equities, even though any spending bill will not be as big as previously thought under a Democrat-run Congress.

Dealers were also keeping tabs on coronavirus developments with England going into lockdown for a second time, joining France and other key European economies, though observers said they had largely been priced into markets now.

- Central bank focus -

The Bank of England on Thursday unveiled an extra £150 billion ($195 billion) in cash stimulus as it forecast a deeper recession than previously thought for the coronavirus-wracked UK economy.

The BoE said recovery would depend also on Britain striking a post-Brexit trade deal with the European Union.

The EU on Thursday warned that Europe's economy would not return to pre-virus normality before 2023.

The pound rose nearly one percent against the dollar Thursday, also amid uncertainty over the election outcome and a Federal Reserve rate decision, said Michael Hewson, chief market analyst at CMC Markets UK.

"Given the current electoral uncertainty it is quite likely that the Federal Reserve will reiterate its determination to support the US economy over the course of the next few months," he noted.

The Fed is unlikely to offer much in the way of specifics Thursday at the end of its two-day policy meeting, besides repeating its commitment to keep the benchmark borrowing rate at zero for the foreseeable future.

But Fed Chair Jerome Powell could take the opportunity to signal a willingness to find new tools to help the economy, after the bank earlier this year pumped trillions of dollars of liquidity into the financial system and cut the US lending rate.

- Key figures around 1200 GMT -

London - FTSE 100: UP 0.4 percent at 5,904.84 points

Frankfurt - DAX 30: UP 1.8 percent at 12,540.16

Paris - CAC 40: UP 1.3 percent at 4,986.61

EURO STOXX 50: UP 1.6 percent at 3,212.71

Tokyo - Nikkei 225: UP 1.7 percent at 24,105.28 (close)

Hong Kong - Hang Seng: UP 3.3 percent at 25,695.92 (close)

Shanghai - Composite: UP 1.3 percent at 3,320.13 (close)

New York - Dow: UP 1.3 percent at 27,847.66 (close)

Euro/dollar: UP at $1.1814 from $1.1732 at 2230 GMT

Dollar/yen: DOWN at 104.13 yen from 104.50 yen

Pound/dollar: UP at $1.3072 from $1.2993

Euro/pound: UP at 90.39 pence from 90.27 pence

Brent North Sea crude: DOWN 0.5 percent at $41.03 per barrel

West Texas Intermediate: DOWN 0.8 percent at $38.83 per barrel

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