World markets higher ahead of bailout vote

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European and U.S. markets brushed aside earlier losses in Asia and weaker than expected U.S. jobs data to post healthy gains Friday on expectations the U.S. House of Representative will finally back the government's $700 billion bank bailout.

At the close, Britain's FTSE 100 index was up 109.91 points, or 2.2 percent at 4,980.25, while Germany's DAX was 136.40, or 2.4 percent higher at 5,797.03. The CAC 40 in France performed the best of all up 117.47 points, or 3.0 percent, at 4,080.75.

In the U.S., the Dow Jones index was 195.37 points, or 1.9 percent, at 10,678.22, recovering some of the 348 point losses recorded Thursday, while the Nasdaq index was 55.1 points, or 2.78 percent higher, at 2,031.77.

Investors are eager to see the government's plan to buy up the bad mortgage-related debt on US banks' balance sheets passed by the House. Earlier this week, the Senate backed the proposal by a large majority, giving a lifeline to the package spectacularly rejected on Monday by the House.

Observers think that the House will back the proposal this time, following changes to the proposals. House Speaker Nancy Pelosi said a vote would not be brought to the floor unless passage was likely. The vote was expected to take place during market hours.

"A lot of the move today is pricing in a yes vote by the House," said Adam Seagrave, a sales trader at CMC Markets.

Even though the pressures in stock markets appear to have settled down for the moment, more stress showed in money markets, particularly in Europe, where the euro interbank offered rate, or Euribor, hit a new all-time high of 5.33 percent. Meanwhile, the key London interbank bank offered rate, or Libor, also climbed to a nine-month high of 4.33 percent.

Analysts and officials say that the U.S. bailout plan will not be enough in itself to free up money market lending and that further co-ordinated action by policy-makers across the globe will be required. A meeting of EU leaders this weekend in Paris and next week's meeting of officials from the G7 countries may offer policy-makers an opportunity to draw up such plans.

With money market rates elevated there is a growing consensus interest rate cuts may be on the way from the U.S. Federal Reserve, the European Central Bank and the Bank of England.

The key economic event Friday was the US non-farm payrolls report for September. The Labor Department reported that employers slashed payrolls by 159,000 in September, the most in more than five years, piling on the pressure on lawmakers to pass the bailout plan.

"They make it more likely that the House will approve the rescue plan tonight, and they may also trigger another Fed rate cut," said Dr. Harm Bandholz, economist at UniCredit.

Wall Street investors did find some room for optimism by the news that Wells Fargo & Co. has trumped Citigroup Inc. with its $15.1 billion dollar all-stock takeover of Wachovia. The deal cheered investors because, unlike several recent banking tie-ups, it wasn't put together at the behest of regulators or using government money. The agreement upends a plan announced Monday by Citigroup to acquire Wachovia's banking operations for $2.16 billion, a move orchestrated by the Federal Deposit Insurance Corp.

"The deal shows that there's some strength in some of the banks and that some of the better capitalised banks have the financing...it's not all doom and gloom," said CMC's Seagrave.

Wachovia shares rose $2.72, or nearly 70 percent, to $6.64 in New York, while Wells Fargo increased $2.44, or 6.9 percent, to $37.60. Shares in Citigroup, which is demanding that Wachovia abide by the terms of the earlier deal, were down $2.15, or 11.6 percent, to $20.35.

Earlier, virtually all Asian markets were in the red in the wake of Thursday's losses on Wall Street. Japan's benchmark Nikkei 225 stock average lost 1.9 percent of its value, closing at 10,938.14, its lowest since May 18, 2005.

Japanese automakers had another bad day dropping for the second day running Friday after the industry reported September sales plunged in the U.S. — their biggest overseas market.

Shares of Toyota Motor Corp. fell 5.3 percent after it said Wednesday that U.S. monthly sales fell 32 percent. Nissan Motor Co. tumbled 7 percent and Honda Motor Co. fell 5.5 percent.

Meanwhile, Hong Kong's Hang Seng index slid 2.9 percent to 17,682.40, while key indices in Australia, Singapore, India, Malaysia and Thailand also fell. Only Taiwan bucked the regional trend and edged higher.

Markets in mainland China, South Korea and Indonesia were closed for national holidays.

Elsewhere, the dollar edged up to 105.03 yen from 104.97 late Thursday in New York. The euro climbed to $1.3819 after dipping as low as $1.3701 in mornig trading.

Meanwhile, oil prices were steady in European trading, with light, sweet crude for November delivery around the $94 mark.

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AP Writers Yuri Kageyama in Tokyo and Alex Kennedy in Singapore contributed to this report.

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