* World shares gain 0.25 pct in subdued trade
* Disappointing BOJ action sends yen up vs dollar
* Oil steady, storm Sandy reduces demand, may damage plant
* U.S. stock, bond markets closed on Tuesday due to storm
LONDON, Oct 30 (Reuters) - World shares rose modestly while the dollar fell on Tuesday as the initial impact of a massive storm in the United States looked to have been less severe than feared.
The greenback also traded at a one-week low against the yen after the Bank of Japan disappointed many investors by easing policy less aggressively than they had hoped after a slump in factory output and exports during September.
However, activity was subdued everywhere since U.S. share and bond markets were closed on Tuesday as one of the biggest storms to hit the country, codenamed Sandy, left large areas of New York City without power or public transport.
The FTSEurofirst 300 index of top European shares was up 0.6 percent at 1,100.12 points and, after gains earlier in Asia, the MSCI world equity index had risen 0.25 percent to 328.68 points.
Strategists said it was too early to tell what impact the destruction caused by Sandy might have on markets.
``Volumes are very low with Wall Street (closed), which makes today's gains quite fragile, and the potential impact of the storm for the insurance sector, estimated at around $20 billion, has not been priced in yet,'' said Patrice Perois, trader at Kepler Capital Markets in Paris.
Demand for the dollar and U.S. bonds tends to rise in times of reduced appetite to take on risk, but if widespread damage prompts speculation the U.S. Federal Reserve could ease monetary policy further to shore up the economy, they could fall back.
Across European stock markets attention was on corporate earnings with results from well known names like Deutsche Bank , Swiss banking giant UBS and oil major BP lifting prices. UBS shares leapt over five percent as it confirmed a plan to cut 10,000 jobs.
The UK's FTSE 100 index was up 0.6 percent, Germany's DAX index up 0.9 percent, and the Switzerland's SMI up 0.47 percent.
MODEST BOJ MOVE
In currency markets, the yen rose broadly after a new plan from the Bank of Japan to increase its asset purchases by 11 trillion yen ($138 billion) disappointed some market players who had positioned for a more aggressive increase.
``It was a very sceptical response to the BOJ policy meeting, made worse by the fact they have revised lower the growth and inflation outlook,'' said Jane Foley, senior currency strategist at Rabobank. ``That has seen the yen unwind a lot of the softer tone we saw going into this meeting.''
The dollar hit a one-week low of 79.25 yen and was down 0.3 percent against a basket of major currencies at 79.67 points.
The weaker dollar helped the European common currency climb 0.3 percent to $1.2935, with lower yields on Spanish and Italian bonds adding to the better mood.
But gains for the euro are still expected to be limited by continuing questions over whether Greece can agree a deal on more austerity, and when Spain might request financial aid.
New data on Spain's economic performance released on Tuesday confirmed the recession has extended into a third quarter, with inflation staying high.
However, 10-year Spanish yields were little changed at 5.66 percent.
``Spain's economy is suffering terribly, which will continue to hit government revenues, and a modest decline in bond yields will not solve the problem,'' said Kit Juckes, strategist at Societe Generale.
German government bonds, the benchmark of European fixed-income markets, were also little changed and Italy was able to sell 7 billion euros of new five- and 10-year government bonds at the lowest cost since May 2011.
The positive Italian auction came despite former prime minister Silvio Berlusconi's threat on the weekend to bring down the technocratic government of Mario Monti.
``The market will have to get used to higher volatility as Italy approaches elections next spring,'' said Chiara Manenti, bond analyst at Intesa SanPaolo.
Italian 10-year yields were 3 basis points lower on the day at 4.98 percent, having risen about 25 basis points in the last two weeks.
In oil markets, prices were mostly steady as traders awaited news of the damage inflicted by Sandy, one of the biggest storms ever recorded in the United States, on refineries and pipelines. A drop in demand caused by the storm had kept prices soft.
Brent oil fell 17 cents to $109.27 a barrel while U.S. crude was down 1 cent at $85.53.
``People are just holding back a little bit to see if there's any real damage and impact, and at the moment it's too hard to see,'' said Bjarne Schieldrop, an analyst at SEB in Oslo.
``It's very clear that it's a very vast energy infrastructure network in that region and it's going to be impacted in some way, in terms of all the logistics to transport oil and oil products,'' he added.