Update The US Senate has passed a revised $US700 billion ($890 billion) financial bail-out bill, bringing the rescue plan one step closer to final passage.
The vote was expected to send a positive signal to global markets that there may be some systemic relief to the crisis that has ensnared global banking, threatening the world's economy.
The initial response in Australia, though, was weak, with the benchmark S&P/ASX-200 share index sliding more than 0.5%, before eventually seesawing back into the black in afternoon trade. The Australian dollar also slumped to below 79 US cents as investors ignored the biggest monthly trade surplus in more than 11 years.
Final passage of the US plan, however, needs support in the US House of Representatives, which sent shockwaves through global markets this week by rejecting an earlier version of the bail-out proposal. A House vote may come as early as Friday, US time.
President George Bush, along with Treasury Secretary Hank Paulson and Fed Reserve chairman Ben Bernanke, is anxious for the bail-out to be passed, to avert further corporate failures and restore some calm to financial markets.
The plan for the US Treasury to buy up billions of dollars in bad debts has run into a popular revolt by US voters who pressured the Congress to reject the bill just weeks ahead of presidential and congressional elections.
The bill today passed easily through the Senate after it was strongly backed by the leadership of both the Republican and Democratic parties. The vote was 74 to 25 against.
The Senate vote comes after the global banking system has been plunged into crisis with a string of corporate failures claiming some of the largest US financial firms including Bear Stearns, Lehman Brothers and American International Group.
Market view
Traders in Australia were divided over the impact of the Senate's vote.
"I don't think it's enough to fix to the system," Rick Klusman, head of institutional trading at Aequs Securities. "I don't think the bill is enough to fix the problem."
The string of corporate failures has created a loss of confidence in the market, which will take years to repair, he said.
Stockbroker Alex Moffatt, of Joseph Palmer & Sons expressed guarded optimism for the effect of the bill's passage.
The legislation today would encourage investors, however, the fate of the bail-out was far from clear.
"It's a good thing but it still has to go through Congress," he said.
Regarding the local market, Mr Moffatt noted the thin volumes: "This is one step along the way. And it's no guarantee it's going to fix it."
US market futures were also less than cheered by the Senate vote. The Dow Jones futures were pointing to a fall of about 0.7% for the Dow Jones Industrial Average when the markets reopen in the US later today, according to Bloomberg.
Australian trade figures for August, though, delivered some positive news. Rising prices and volumes for exports commodities including coal delivered a trade surplus of $1.36 billion for the month, the second surplus for the year, and the best result since June 1997.
Analysts had been predicting a surplus of $200 million for the month, according to Bloomberg data. Imports, though, fell 2%, an indication of cooling demand in the domestic economy.
Senate adds sweeteners
The Senate vote is likely to add momentum to the push to pass the plan into law before the weekend.
The package had been enhanced with several sweeteners including extending tax cuts for business and for the renewable energy industry and an increase in the insurance limits on bank deposits from $US100,000 to $US250,000. Stockbroker Alex Moffatt, of Joseph Palmer & Sons expressed guarded optimism for the effect of the bill's passage.The legislation today would encourage investors, however, the fate of the bail-out was far from clear."It's a good thing but it still has to go through Congress," he said.Regarding the local market, Mr Moffatt noted the thin volumes: "This is one step along the way. And it's no guarantee it's going to fix it."US market futures were also less than cheered by the Senate vote. The Dow Jones futures were pointing to a fall of about 0.7% for the Dow Jones Industrial Average when the markets reopen in the US later today, according to Bloomberg.Australian trade figures for August, though, delivered some positive news. Rising prices and volumes for exports commodities including coal delivered a trade surplus of $1.36 billion for the month, the second surplus for the year, and the best result since June 1997.Analysts had been predicting a surplus of $200 million for the month, according to Bloomberg data. Imports, though, fell 2%, an indication of cooling demand in the domestic economy.The Senate vote is likely to add momentum to the push to pass the plan into law before the weekend.The package had been enhanced with several sweeteners including extending tax cuts for business and for the renewable energy industry and an increase in the insurance limits on bank deposits from $US100,000 to $US250,000. Senators also retained the limits of "golden parachute'' severance payments to disgraced Wall Street executives, which were not in the original Bush administration plan.
Senate Republican leader, Mitch McConnell said he was hopeful the Senate vote would prompt the House to follow suit.
"I think a good vote coming out of the Senate will certainly be helpful over in the House side," he said.
But it is still uncertain whether the bill has the numbers in the House of Representatives. It is now not expected to vote until Friday US time (Saturday Australian time), a sign that the leaders are still struggling to persuade 12 lawmakers to change their minds. On Monday, the House stunned the markets by rejecting the package 228-205.
Unlike the Senate, where only one third of the 100 senators are facing re-election, the entire House must face the electorate in November.
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 Dana Perino, White House spokesperson, speaking on the financial situation 

Stock markets around the world continued to fall dramatically today. This is following the ongoing events in the financial world, including the US Government's $700 billion bail out of the financial sector.

As of 18:00 UTC, the primary UK index, the FTSE 100, was one of the few indexes to increase in value. It went up by 0.16% (16.03 points), but stayed below 5000 mark at 4605.22. Some shares in this index, however, fared very poorly, with shares in HBOS falling by an incredible 41.54% to end the day on 94 points. 

The Dow Jones index continued to fall today, and, as of 18:00 UTC, it had fallen 260.77 points, or 2.62% to 9694.73, continuing its run below 10,000. Bank of America fared worse, with a fall of 17.38%.

The Nasdaq index also fell dramatically today, down 2.95% (54.97 points) to 1807.99 points. YRC Worldwide, Inc. was the biggest faller in this index, with its loss of 27.30% that took the company's share price down to 5.13.



Dana Perino, a spokesperson for the White House, commented today on the recent falls in the stock market that are described above. "One of the things that the President can do is to remind them what this rescue package would do. One of the most important things that it would do is to make sure that everybody knows that their bank deposit is safe, insured by the FDIC, and the legislation allowed for a temporary increase from $100,000 to $250,000. This reassures people that their bank accounts are safe, and that's an important message," she stated, trying to reassure citizens.

"But remember, with this rescue package, we asked the American people to do a really big thing and commit a lot of money in order to help prevent the credit freeze from affecting everybody lower on down the food chain. And to that extent, yes, the President thinks that it's important that they hear from the President of the United States about how he understands that nobody wanted to do this legislation, however, it was the right thing to do. And now that we've done it, the most important thing is that Treasury move in the most expeditious way possible, to be efficient and to be effective, to make sure that the plan will do what it's supposed to do and un-freeze these credit markets."