(Updates prices, adds Wall Street outlook)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Oct 2 (Reuters) - The U.S. Senate's approval of a
revised crisis bailout bill helped boost European stocks and
lift the dollar on Thursday but economic worries weighed on Asia
and concern about final passage of the proposal lingered.
Wall Street also looked set to open lower.
Interest rates were in focus with the European Central Bank
meeting later in the day and markets pricing in a U.S. Federal
Reserve rate cut later this month.
The ECB is expected to keep rates on hold at 4.25 percent,
but its views on the global financial crisis, now firmly
spreading to Europe, will be closely scrutinised by the market.
Investors, meanwhile, also got a rare bit of good banking
news when Switzerland's UBS AG <UBSN.VX> said it would make a
small profit in the third quarter after a year of losses.
The U.S. Senate on Wednesday voted 74 to 25 in favour of a
revised bailout package aimed at reinvigorating frozen worldwide
credit markets and interbank lending.
The House of Representatives is expected to vote on the new
bill on Friday after its surprise rejection of an initial plan
at the weekend, a move that sent U.S. stocks tumbling.
"Assuming that the House does pass it Friday we should see a
rebound in global asset markets," said Callum Henderson, chief
currency strategist at Standard Chartered in Singapore.
Europe was already reacting. The FTSEurofirst 300 <>
index of top European shares was up more than 1.5 percent.
"I wouldn't be surprised if we see a decent rally over the
next month as long as we get the passage of the bill so that
people can think that the building blocks are in place to make
the restructuring of the banking sector more orderly," said
Andrew Bell, head of research at Rensburg Sheppards.
Earlier, however, deepening worries about the global economy
kept Asia stocks in the red.
The benchmark Nikkei average <> fell 1.9 percent to a
three-year closing low. The broader Topix index fell 2.2 percent
to book its lowest close since October 2004.
EURO AT LOWS
On currency markets, the Senate move was a major driver of
the dollar.
The euro fell broadly in early European trade, hitting a 2-
year low against the Japanese yen and a one-year trough versus
the dollar.
It was at 146.63 yen <EURJPY=> and at $1.3912 <EUR=>.
"Generally we're in a somewhat bullish dollar environment
after the Senate vote," said Daragh Maher, deputy head of global
FX strategy at Calyon.
"Given that European banks are increasingly in the frame and
it's not clear that Europe is in a similar position to the U.S.
to deliver a pan-European solution should things deteriorate
further, that's working against the euro," he said.
Demand for euro zone government bonds slipped, lifting
yields.
The two-year yield <EU2YT=RR> was up 2 basis points at 3.441
percent and the 10-year yield <EU10YT=RR> gained 3 basis point
to 4.026 percent.
(Additional reporting by Ian Chua and Atul Prakash, editing by
Mike Peacock)
