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European shares rose early on Wednesday, led by banks on hopes that the U.S. Senate will pass a new version of a $700 billion bailout package for the embattled financial sector later in the day.

By 0715 GMT, the FTSEurofirst 300 index of top European shares was up 0.7 percent at 1,070.94.

Banking stocks were the main gainers on the index. Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), UniCredit (CRDI.MI: Quote, Profile, Research, Stock Buzz), Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Credit Agricole (CAGR.PA: Quote, Profile, Research, Stock Buzz) and HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) were 0.7-6.2 percent higher.

The U.S. Senate will vote on Wednesday night on a new version of the $700 billion bailout package for Wall Street, rekindling hopes that the credit crisis can be stemmed before claiming yet more banks and causing further damage to the global economy. [ID:nSP361078]

“The market is all about confidence and investors need to just hang in there and not be swayed by different rumours. The worrying sign is that it is based on no more than a hopeful optimism without much basis to it at the moment,” said Justin Urquhart Stewart, director at Seven Investment Management.

“This is the eye of the storm until we wait for the decision from the U.S. Senate and see how the restructuring takes place.”

The mining sector gained as copper <MCU3=LX> rose 1.4 percent.

BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz) was up 3 percent and Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) was 7 percent higher after Australia’s competition watchdog cleared BHP’s proposed around $114 billion bid for Rio, saying it was unlikely to substantially lessen competition. [ID:nSYU005209]

Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz) slumped 27.5 percent after Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) said it would not make a formal offer for the group. Xstrata was up 9.9 percent.

Asian stocks in most of the markets that were open Wednesday bounced back on hopes that U.S. lawmakers would pass their $700 billion financial rescue plan before the end of the week. Nevertheless, worries over the long-term global economic outlook persist.

Investors returned to the market Tuesday on Wall Street, sending the Dow Jones industrial average up 485.21 points, or 4.7%, to 10,850.66, more than halving its loss over the past two days, to 2.6%. The S&P 500, which added 58.35 points, or 5.3%, to 1,164.74, cut its decline for the week to 4.0%, while the Nasdaq’s gain of 98.60 points, or 5.0%, to 2,082.33, helped shave its two-day loss to 4.6%. (See “Stocks Surge, Credit Crumbles, Investors Confused.”)

There was market consensus that U.S. senators, under severe pressure from the public and their own contributors, would act swiftly on passage of the bailout bill on Wednesday evening. Presidential candidates John McCain and Barack Obama separately voiced their support of the bill and proposed that the Federal Deposit Insurance Corp. insure up to $250,000 on individual deposits, in the hope that the new provision would help gain enough votes for passage in the House.

Sharing in the optimism, Japan’s Nikkei 225 index climbed nearly 1.0%, to close at 11,368.26; the broader Topix index rose as well, by 1.3%, to 1,101.13.

Financial stocks led the rise in Japan. Mitsubishi UFJ (nyse: MTU - news - people ) surged 3.4%, to 923 yen ($8.70). Nomura Holdings (nyse: NMR - news - people ) soared nearly 6.0%, to 1,405 yen ($13.24). Daiwa Securities (other-otc: DSECY - news - people ) rose 3.4%, to 763 yen ($7.19). Exporters also rallied, with Canon Inc (nyse: CAJ - news - people ) gaining 4.2%, to 3,980 yen ($37.52), and Sony (nyse: SNE - news - people ) moving up by 1.9%, to 3,210 yen ($30.26). Toyota Motor (nyse: TM - news - people ) shares appreciated by 1.8%, to 4,460 yen ($41.96), notwithstanding a report from the Japan Automobile Dealers Association indicating that its sales fell 6.0% in September. (See “Toyota Finds Constructive Ways To Cut Steel Price.”) In the tech sector, semiconductor firm Rohm Co. (other-otc: ROHCF - news - people ) shares fell by 1.75%, to 5,610 yen ($52.81).

The stock gains pushed down 10-year Japanese government bond futures to a two-month low, off more than a full point, to 136.39. The U.S. dollar was steady against the yen, at 106.15 yen.

But longer-term worries still hung over the market. “Basically, Tokyo’s limited gains show the market doesn’t really trust the Wall Street rally,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. “Financial instability has now spread to Europe, and investors are worrying about the global economy and what it might mean for Japanese corporate results.”