U.S. jobs data weak, pressure on Congress to pass bailout bill

In a positive sign, Wells Fargo, one of the strongest U.S. banks, stepped in to buy Wachovia, but in Paris French Prime Minister Francois Fillon said the world stood on the "edge of the abyss."

Around the world, calls came for the U.S. House to pass the bailout bill, which would allow the U.S. Treasury to buy toxic debt from U.S. banks, a move that many say is needed to head off the worst financial crisis since the Great Depression.

The House shocked world markets on Monday by rejecting a previous draft. With elections on Nov. 4, lawmakers are wary of voter backlash in asking taxpayers to pay for Wall Street's mistakes.

In Washington, the Labor Department said there were 159,000 fewer jobs in the economy in September than in August, coming on top of manufacturing data this week suggesting a recession is approaching.

Investors focused on hopes for the bailout vote and on the Wachovia deal, in which Wells Fargo trumped a bid by Citigroup and said it would complete the transaction without government help.

The S&P 500 index opened 2.1 percent higher and the Dow Jones industrial average was up 1.3 percent.

Action on the U.S. bailout was of paramount importance, European Central Bank President Jean-Claude Trichet said.

"(U.S. Treasury) Secretary (Henry) Paulson's plan obviously must be passed," he told Europe 1 Radio. "It must be. It is necessary."

Late on Thursday, U.S. House Majority Leader Steny Hoyer said the House would vote on the bailout bill on Friday, a sign that political leaders were confident of approval. House Speaker Nancy Pelosi had said the bailout package would not be brought to the floor without the votes secured to pass it.

Still, some Republicans who opposed it on Monday said they were not swayed by changes made to the Senate version, and some Democrats said they were put off by those changes.

France's prime minister, whose country is hosting an emergency summit with Italian, British and German leaders on Saturday, said only collective action could solve the financial crisis. He said he would not rule out any solution to stop any bank failing.

"The world is on the edge of the abyss because of an irresponsible system," Fillon said, alluding to widespread anger over past lax regulation of financial markets and excessive lending.

Fillon said President Nicolas Sarkozy would propose at the emergency meeting measures to unfreeze credit and coordinate economic and monetary strategies.

Bad news mounted in the European financial sector.

In Switzerland, UBS AG, hardest hit among European banks by its exposure to subprime-related holdings, said it would cut 2,000 investment banking jobs -- on top of the 4,100 positions cut in the past year.

Worries grew that even if Washington agrees on the package, it will not be enough to resolve deeper-rooted weakness. New data showed that a U.S. recession is nearing and Europe's economy is worsening.

"Investors expect the U.S. House to approve the bailout, but even if that happens, it would have a neutral impact on the market as its effectiveness is still questionable," said Takahito Murai, general manager of equities at Nozomi Securities in Tokyo.

A collapse in the U.S. housing market and resulting "bad mortgages" has undermined confidence in the financial sector, with interbank lending and credit to businesses and private individuals all but seizing up. Central banks have injected billions of dollars to maintain some flow of funds.

UNILATERAL ACTION
Divisions have emerged within Europe over the past week, with Ireland offering guarantees on bank deposits, prompting a flight of capital from British lenders to Irish banks, and Greece promising to safeguard savers' cash.

EU partners said Ireland's move could break competition rules and threatened the unity necessary to ensure an ordered approach to turmoil ahead.

World stocks fell to a fresh three-year low on concerns the bailout would not be enough to prevent the U.S. economy and that of the rest of the world slowing further.

"Paralysis is spreading across the asset markets despite the various attempts by authorities across the globe to shore up confidence," the Calyon brokerage said in a note to clients.

Oil prices CLc1 rose above $94, supported by expectations that the House would approve the plan, which would then be passed into law by President George W. Bush.

Wall Street endured a dismal day on Thursday, as stocks dropped 4 percent and a seizing up in money markets sparked demand for the dollar.