* Asian stocks hit by global economy worries
* Safe-haven bids gain ahead of U.S. house vote
* Dollar edges up as attention swings to ECB meeting
(Adds detail, quotes, updates prices)
By Rafael Nam
HONG KONG, Oct 2 (Reuters) - Asian stocks fell and safe
haven assets such as government debt gained after the U.S.
Senate's approval of a massive bank bailout plan failed to
dispel the deepening worries about the global economy.
Doubts about whether the U.S. House of Representatives will
now approve the revised $700 billion rescue plan for the
financial system also weighed, after their unexpected rejection
of an initial package on Monday sent global markets reeling.
However, the dollar remained better bid against other major
currencies after the financial crisis this week started taking
a bigger toll on European banks and worldwide growth.
Investors are bracing for comments on the financial crisis
from the European Central Bank, which meets later in the day
amid expectations it will keep interest rates on hold.
"This is clearly positive news but there's still the lower
house vote, so there is little room for optimism. Even if the
bill is passed, worries remain over the global economic outlook
so financial markets are unlikely to stabilise," said Masamichi
Adachi, a senior economist at JPMorgan Securities in Japan.
"It's a completely different world now. All the things U.S.
authorities are doing now are simply aimed at preventing a
global meltdown. They might trigger a short rally in markets
but won't offer a fundamental solution," he said.
The MSCI index of Asia-Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 0.7 percent, erasing a modest gain
immediately before the U.S. Senate vote, while Tokyo's Nikkei
average <> fell 1.1 percent.
South Korean stocks <> were among the biggest
decliners with a 1.4 percent fall, while other markets such as
Australia <>, Hong Kong <> and Taiwan <> fell
less than 1 percent each.
STEEP STOCK SLIDE
Asian stocks have fallen in each of the previous five
months, culminating in a 17 percent drop in September that
marked the biggest monthly decline since the financial crisis a
decade ago.
The inability to gain traction on Thursday came even after
the U.S. Senate voted 74 to 25 in favour of a revised bailout
package aimed at reinvigorating frozen worldwide credit markets
and interbank lending. []
The U.S. House of Representatives is expected to vote on
the bill on Friday and, if approved, it would go to the White
House for signature into law by U.S. President George W. Bush.
Given the uncertainties, investors preferred to play it
safe. The U.S. Treasury 10-year note <US10YT=RR> erased earlier
losses to edge up, sending yields down to 3.73 percent,
compared to 3.74 percent late in U.S. trade on Wednesday.
Gold <XAU=> also advanced, trading at $872.30 an ounce, up
from a notional close of $868.75 on Wednesday.
Continued signs of weakness in the U.S. economy --
including data on Wednesday showing U.S. factory activity
shrank in September to its lowest since the 2001 recession --
bode ill for a global economy that depends in good measure to
the largesse of the U.S. consumer.
"Market expectations for Asian growth was a bit too strong
at the start of the year. Asian currencies will weaken against
the dollar," said Kit Wei Zheng, an economist at Citigroup in
Singapore.
"The weakness in the rest of the world has not been priced
in and currencies will move to reflect that in the coming
months. It will be a story of the rest of the world weakening
rather than a rebound in the U.S. dollar."
DOLLAR FIRM
The dollar index <.DXY>, a a gauge of performance against
six major currencies, rose 0.1 percent to 79.783. That was near
a one-year peak struck last month but off a high of 80.025 hit
before the Senate vote.
The euro dipped 0.3 percent to $1.3975 and was near a
one-year low of $1.3882 struck last month, amid expectations
the European Central Bank still has room to cut rates at some
point, which would erode the euro's yield advantage over the
dollar.
Europe is becoming a point of focus for global investors as
the credit crisis hits European financial institutions such as
Fortis, which was rescued by a 11 billion euro bailout on
Sunday.
Oil <CLc1> was up 74 cents at $99.27, down from earlier
gains to as much as $100.37 as concerns remained over weakening
demand and growing supplies in the United States.
(Editing by Lincoln Feast)
