President Barack Obama returns from the campaign trail today with little time to savour victory, facing urgent economic and fiscal challenges and a still-divided Congress.

Mr Obama defeated Republican challenger Mitt Romney overnight after a gruelling presidential race.

He used his acceptance speech in front of a huge cheering crowd in Chicago to strike a conciliatory note toward his political opponents.

However, although voters have given their stamp of approval for a second Obama term, that may not easily translate into a mandate to push forward with his agenda.

Americans chose to stick with a divided government in Washington by leaving the US Congress as it has been since the midterm elections of 2010.

Mr Obama's fellow Democrats retain control of the Senate and Republicans keep the majority in the House of Representatives, giving them power to curb the president's legislative ambitions.

This is the political reality that Mr Obama, who won a far narrower victory over Mr Romney than his historic election as the country's first black president in 2008, faces when he returns to Washington later today.

It did not stop him from basking in the glow of re-election together with thousands of elated supporters in his hometown of Chicago early this morning.

"You voted for action, not politics as usual," Mr Obama said, calling for compromise and pledging to work with leaders of both parties to reduce the deficit, to reform the tax code and immigration laws, and to cut dependence on foreign oil.

Mr Obama told the crowd he hoped to sit down with Mr Romney in the coming weeks and examine ways to meet the challenges ahead.

US Election as it happened | Election night in pictures | Media Reaction

However the problems that dogged Mr Obama in his first term, which cast a long shadow over his 2008 campaign message of hope and change, still confront him.

He must tackle the $1trillion (€780bn) annual deficit, rein in the $16 trillion (€12bn) national debt, overhaul expensive social programs and deal with the split Congress.

The immediate focus for Mr Obama and US lawmakers will be to confront the "fiscal cliff," a mix of tax increases and spending cuts due to extract $600bn (€469bn) from the economy at the end of the year unless a deal is struck in Congress.

Close contest

Mr Romney, a multimillionaire former private equity executive, came back from a series of campaign stumbles to fight a close battle after besting Mr Obama in the first of three presidential debates.

However the former Massachusetts governor failed to convince voters of his argument that his business experience made him the best candidate to repair a weak US economy.

Mr Obama saw off Mr Romney in important battleground states and comfortably passed the threshold of 270 electoral college votes needed for victory.

The nationwide popular vote remained extremely close, with Mr Obama taking about 50% to 49% for Mr Romney after a campaign in which the candidates and their party allies spent a combined $2bn.

In the end, Mr Obama won re-election on the issue that was expected to be his downfall: the sluggish US economy.

The US is still recovering from its deepest recession in 80 years, and employers are barely adding enough jobs to keep pace with population growth.

Trillions of dollars of household wealth have vanished in the housing bubble, while the gap between rich and poor widens.

However historically, voters have given a second term to incumbent presidents who preside over even modest economic growth during an election year.

That pattern appears to have held for Mr Obama. If the economy is not exactly roaring ahead, it improved steadily over the course of the year.

"It was never going to be a landslide," said John Sides, a political science professor at George Washington University. "But it was always his race to lose."

Mr Romney conceded the election early this morning.

"This is a time of great challenges for America and I pray that the president will be successful in guiding our nation," Mr Romney told supporters in Boston after calling Mr Obama to congratulate him.

"I so wish, I so wish, that I had been able to fulfil your hopes to lead the country in a different direction, but the nation chose another leader," Mr Romney said in his concession speech.

World leaders congratulate Obama

World leaders have congratulated Mr Obama on his re-election.

Taoiseach Enda Kenny said he looks forward to working closely with President Obama and the US, as Ireland assumes the Presidency of the European Union on 1 January 2013.

Mr Kenny said he sees Ireland's EU Presidency as an opportunity to seek to strengthen ties between Europe and the US, including in the area of international trade.

President Michael D Higgins has also congratulated Mr Obama on his victory, and assured him of the continued goodwill of the Irish people as he begins his second term.

British Prime Minister David Cameron sent his congratulations, saying: "I think he's a very successful US president and I look forward to working with him in the future."

Speaking during a tour of the Middle East, Mr Cameron said: "I would like to congratulate Barack Obama on his re-election.

"I have really enjoyed working with him over the last few years and I look forward to working with him again over the next four years.

"There are so many things that we need to do: we need to kick start the world economy and I want to see an EU-US trade deal.”

Russian President Vladimir Putin has sent a telegram to Mr Obama congratulating him on the victory.

"We hope that the positive beginnings that have taken hold in Russian-US relations on the world arena will grow in the interests of international security and stability," Russian news agencies quoted his spokesman Dmitry Peskov as saying.

US Congress has record numbers of women

A record number of women will serve in the US Senate and House of Representatives after sweeping victories in yesterday's election that challenged the traditional male makeup of the US legislative branch.

20 women will serve in the 100-member Senate and at least 81 of the 435 members of the House of Representatives will be women. 

For several states, women won Senate seats for the first time, including in close races in Massachusetts, where Democrat Elizabeth Warren defeated Republican incumbent Scott Brown.

In Nebraska, where Republican Deb Fischer upset former Democratic Senator Bob Kerrey; and in Wisconsin, where another Democrat Tammy Baldwin also became the first openly gay senator.

A number of congressional districts will also be represented by women for the first time.

In another first, three women Democrats - Governor-elect Maggie Hassan and Representatives-elect Carol Shea-Porter and Annie Kuster - made New Hampshire the first state to vote for an all-female congressional delegation and governor, according to Emily's List.

While the main policy theme of the presidential election was the poor state of the US economy, issues that predominantly affect women - contraception, abortion, rape and others - often came to the forefront in the White House and congressional contests.

Some of the most memorable gaffes of the 2012 races involved male politicians talking about women's health and abortion.

Missouri Republican Todd Akin, who had been a favorite to unseat Democratic Senator Claire McCaskill, is seen as having sabotaged his campaign with a comment that women had biological defences against pregnancy in cases of "legitimate rape."

He lost yesterday.

Similarly, Illinois Republican Joe Walsh lost a House seat to Democrat Tammy Duckworth after saying that abortion was never necessary to save a woman's life.

Indiana Republican Richard Mourdock lost his bid for a Senate seat to Democrat Joe Donnelly after saying that a pregnancy resulting from rape was "something God intended to happen."

Nearly twice as many women as men rank social issues, such as abortion and same-sex marriage, as most important for their vote, according to Reuters/Ipsos polling data.