Senate vote lifts dollar, Europe stocks

By Jeremy Gaunt, European Investment Correspondent

LONDON (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 over final passage of the proposal lingered.

Wall Street also looked set to open lower.

Interest rates were in focus with the European Central Bank keeping rates on hold at 4.25 percent.

The bank's views on the global financial crisis, now spread into Europe, will be closely scrutinized by the market, which expects a cut from the Bank of England next week and from the Federal Reserve by the end of the month.

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 favor 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 .FTEU3 index of top European shares was up around 1 percent after earlier gaining 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 .N225 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.