* European shares dip as investors pounce on poor earnings
* Caution on U.S. election holds dollar, yields steady
* Investors expect a split Congress, Democrats to take House
* Oil drops on Iran sanction exemptions (Changes byline, dateline to NEW YORK; adds Wall Street open; updates throughout)
By Hilary Russ
NEW YORK, Nov 6 (Reuters) - Stock markets edged up modestly on Tuesday, with trading thin in the United States, while the dollar and Treasury yields held steady, as Americans went to the polls in a pivotal midterm election that could shift the balance of power in Congress.
MSCI's gauge of stocks across the globe gained 0.12 percent.
The elections mark the first major test of President Donald Trump's polarizing personality and hardline policies on taxes, trade and immigration. If his Republican party loses control of the House of Representatives, some of his power could be curbed.
"Unlike the U.S. presidential election or the U.K.'s Brexit referendum, the upcoming U.S. (midterm) elections are not a binary event," said Yasuo Sakuma, chief investment officer at Libra Investments.
"So it's unlikely to send stocks significantly in one direction, apart from initial quick reactions."
European shares slipped on disappointing corporate earnings and caution ahead of the U.S. vote. Politics weighed on Italian stocks, and oil prices fell as investors digested exemptions to sanctions on Iranian oil. The pan-European STOXX 600 index lost 0.20 percent
On Wall Street, the Dow Jones Industrial Average rose 111.62 points, or 0.44 percent, to 25,573.32, the S&P 500 gained 8.92 points, or 0.33 percent, to 2,747.23 and the Nasdaq Composite added 28.70 points, or 0.39 percent, to 7,357.56.
"With the Democrats favourites to take control of the House and the Republicans the Senate, the next couple of years may be far more difficult for Trump," said Craig Erlam, a senior market analyst at Oanda in London.
"When you consider how markets have done since his election victory – granted, primarily on the back of tax reforms – it's easy to see why this may not be the most investor-friendly result."
The benchmark S&P 500 index has climbed 28 percent since Trump's election in November 2016, more than under any other president in the past 64 years.
With so much at stake, currency market moves were tight. The dollar hardly moved against the euro and gained some ground against the yen as dealers kept their options open.
Sterling erased earlier losses in volatile trading on growing hopes of a Brexit deal breakthrough after a British cabinet meeting.
The dollar index, tracking the greenback against a basket of six major currencies, rose 0.07 percent, with the euro up 0.1 percent to $1.1417.
The Japanese yen weakened 0.16 percent versus the greenback at 113.39 per dollar.
Italian shares were essentially flat, despite frayed nerves there after euro zone finance ministers called on Rome to change its budget to conform with European Union rules at a meeting late on Monday.
Oil prices sank, with U.S. crude futures sliding to a seven-month low, as Iran said it had so far been able to sell as much oil as it needs to after Washington granted sanction waivers to top buyers of Iranian oil.
U.S. crude fell 2.74 percent to $61.37 per barrel and Brent was last at $71.23, down 2.65 percent on the day.
"The details on the Iran sanctions waivers are trickling out, and it appears much more Iranian oil will remain on the market in the near-term than previously thought," said John Kilduff, a partner at Again Capital Management in New York.
Both oil benchmarks have slid more than 15 percent since hitting four-year highs in early October.
Additional reporting by Marc Jones, Helen Reid, Saikat Chatterjee and Shadia Nasralla in London; Sruthi Shankar in Bengaluru; Kate Duguid and Stephanie Kelly in New York; Editing by Bernadette Baum