WASHINGTON/NEW YORK - 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 a weakening global economy.

U.S. stocks, after suffering their worst fall in 21 years on Monday after the House of Representatives rejected the original package, roared back on Tuesday as investors bet Washington would manage to salvage the package and stabilize the financial industry.

The Standard & Poor's 500 index shot up by more than 5 percent, its biggest one-day gain in six years, and Asian stocks followed suit on Wednesday, though gains there were tempered by further evidence of economic slowdown.

It may also win over lawmakers trying to sell their constituents on an expensive plan funded by taxpayers and seen as benefiting wealthy financiers.

If the bailout package passes in the Senate, as expected, it will put more pressure on the House of Representatives to follow suit when it meets again on Thursday.

President George W. Bush, Treasury Secretary Henry Paulson and the two candidates hoping to succeed Bush as president, Republican Sen. John McCain and Democratic Sen. Barack Obama, reaffirmed their support for a bailout plan on Tuesday.

Both Obama and McCain said they would return to Washington for the vote, due to take place sometime after a series of votes starting at 7:30 p.m. EDT (2330 GMT).

The plan, which would allow the Treasury to buy toxic mortgage-related assets from banks, has been the main hope for government action to unlock credit markets and head off a deeper economic downturn in the United States and abroad.

"We're right at the moment where action is needed," Dominique Strauss-Kahn, managing director of the International Monetary Fund, told Reuters. "A non-perfect plan is better than no plan at all."

Global money markets remained frozen on Tuesday, and London interbank offered rates shot to record levels, indicating banks were not lending to each other. The rate for overnight dollar loans rose to nearly 6.9 percent from just over 2.5 percent on Monday. Overnight dollar borrowing costs stayed near 6 percent in Asia on Wednesday.

U.S. regulators were also readying a revision of the "fair value" accounting rule that has led to massive charges on mortgage-related assets, and has been blamed for deepening the credit crisis. That would mean U.S. banks would not need to mark hard-to-price assets down to firesale prices.

GLOBAL AFTERSHOCKS

After claiming some of the biggest names on Wall Street in recent weeks, showckwaves from the crisis engulfed Europe and beyond this week.

Ireland unveiled a blanket guarantee for savings held by its banks and for the second time in a month Russia briefly shut down its stock markets.

France, Belgium and Luxembourg poured 6.4 billion euros into Franco-Belgian bank Dexia to avoid defaults on its loans, and France promised new bank measures to help depositors.

Dutch-Belgian banking and insurance group Fortis, partially nationalized earlier this week, halted $4 billion worth of asset sales to China's Ping An and Deutsche Bank

Shares of the U.S. banks seen emerging with a strengthened hand after the crisis, including Citigroup Inc, JPMorgan Chase & Co and Bank of America Corp, shot higher on Tuesday.

Hopes for a revived rescue deal supported the dollar and lifted oil prices above $102 a barrel. But weak economic data from Japan, combined with fears of more corporate profit warnings limited Asian stock gains to around 1 percent.

"We've still got slowing global growth and still got a credit crisis. So I just think there's going to be ongoing volatility from here on in for the rest of the year," said ABN AMRO equity strategist Greg Goodsell in Sydney.

Hedge fund managers have also been bracing for a wave of investors to cash out as money rushes to safe haven assets.

One of the first signs of how quickly the economic pain is spreading from Wall Street to Main Street will come with Wednesday's release of U.S. auto sales for September, when the financial crisis began to topple banks and freeze credit.

The White House announced on Tuesday that Bush approved a mammoth spending bill that includes a $25 billion loan package for automakers, which faced far less ire than the $700 billion Wall Street plan.

"Wall Street as we knew it is already toast -- beyond bailing out -- but the public still thinks of this legislation as bailing out Wall Street," said Donald Straszheim, vice chairman of Roth Capital Partners in Los Angeles. "Until this perception changes, do-overs to quickly pass similar legislation won't fly."