* World shares gain 0.3 pct in subdued trade
* Disappointing BOJ action sends yen higher vs dollar
* Oil edges up, storm Sandy cut demand but 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 weakened on Tuesday as the initial impact of a massive storm in the United States looked to have been less severe than feared.
The greenback was also knocked by a resurgent yen after the Bank of Japan disappointed many investors by easing policy less aggressively than had been 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 0.75 percent at 1,101.90 points and, after gains earlier in Asia, the MSCI world equity index had risen 0.3 percent to 328.88 points.
U.S. stock index futures, which kept trading in Europe, edged lower but volumes were very light.
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 four percent as it confirmed a plan to cut 10,000 jobs.
Britain's FTSE 100 index was up 0.8 percent, Germany's DAX index up 0.9 percent and Switzerland's SMI index up 0.5 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 79.28 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 0.4 percent to $1.2958, 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 with its creditors, and when Spain might request financial aid.
Spain fell deeper into recession in the third quarter and prices rose sharply in October, according to new data, keeping pressure on the government to take some action as the prospect of further civil unrest grows.
``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.
Prime Minister Mariano Rajoy has maintained an ambivalent stance towards applying for a politically embarrassing rescue that would kickstart an ECB bond-buying programme and ease financing costs.
Investors, too, seem willing to wait; 10-year Spanish bond yields were little changed at 5.66 percent.
German government bonds, the benchmark of European fixed-income markets, were also mostly flat.
Italy was even able to sell 7 billion euros of new five- and 10-year government bonds at its lowest cost since May 2011.
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 edging higher as traders awaited news of the damage inflicted by Sandy on refineries and pipelines, although weaker demand from the storm-hit region capped gains.
Brent crude for December rose 13 cents to $109.57 a barrel, recovering from a fall to $108.75 earlier, while U.S. crude for December was up 40 cents at $85.94.
U.S. gasoline futures were little changed at $2.7530 a gallon, after climbing more than 5 cents on Monday on expectations of tighter supply.
``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.