Secretary of State Condoleezza Rice reflected the joy of many black Americans, calling Obama "inspirational" and praising the United States for its ability to surprise.

"As an African-American, I'm especially proud, because this is a country that's been through a long journey, in terms of overcoming wounds and making race not the factor in our lives," Rice told reporters.

"That work is not done, but yesterday was obviously an extraordinary step forward," she said.

Many world leaders welcomed Obama's victory. Some hailed it as an opportunity to restore a tarnished US image; others urged him to help forge a new economic order. "Your election has raised enormous hope in France, in Europe and beyond," French President Nicolas Sarkozy said.

Initial market reaction was muted. US stocks fell by midday on Wednesday as worries about the weakening economy returned to center stage.

Obama won at least 349 Electoral College votes with two states still too close to call. He led McCain in the popular vote by 52 percent to 46 percent.

Democrats gained at least five Senate seats and about 20 in the House of Representatives, giving them a commanding majority in Congress and strengthening Obama's hand. Four Senate seats remained undecided.

Americans celebrated in front of the White House to mark Obama's win and Bush's imminent departure. Cars jammed downtown Washington streets, with drivers honking their horns and leaning out their windows to cheer.

Thousands more joined street celebrations in New York's Times Square and in cities and towns across the country.

... contd.