George Bush said the state of the US economy demanded the bailout be approved [AFP]

Tracking steep declines overnight on Wall Street, Japanese shares opened lower on Friday, with the benchmark Nikkei sliding around one per cent in early trading to hit its lowest point this year.

Australian shares fell by more than two per cent as investors awaited Friday's second vote on an amended bill after the House of Representatives rejected the first draft on Monday.

The wait for the vote and a report showing a rise in the number of people filing new claims for jobless benefits on Thursday drove the Dow Jones industrial index down by nearly 350 points, or more than 3.2 per cent.

Broader US stock indicators also fell sharply, with the Standard & Poor's 500 index falling just over four per cent and the Nasdaq composite dropping nearly 4.5 per cent.

The US senate had endorsed a reworked version of the bailout plan on Wednesday, two days after the House of Representatives rejected an initial plan to buy up bad debts that triggered the biggest slide in US stocks in more than two decades.

Speaking after the 74-25 senate vote, George Bush, the US president, called the bailout "essential to the financial security of every American".

Expected to pass

Harry Reid, the senate Democratic leader, said he expected the House of Representatives to also approve the bill on Friday.

However, some on Wall Street were sceptical about the bill's chances after Monday's surprise rejection by the House of Representatives.

Paul Mendelsohn, a chief investment strategist at Windham financial services in Charlotte, Vermont, said he was not "betting on anything here because I don't know what the House is going to do".

"If this bill doesn't pass in the House, it's game over," he warned.

But opponents of the plan say they are concerned about handing that much power to one man, and reject the idea of using taxpayer money to rescue disgraced Wall Street firms.

Europe summit

Despite early gains on Thursday, most markets in Europe also closed down following the falls in New York.

Nicolas Sarkozy, the French president, announced that he was to hold a European financial summit to discuss the global crisis in Paris on Saturday.

Those attending will include Gordon Brown, the UK prime minister, Silvio Berlusconi, the Italian prime minister, and Jean-Claude Trichet, the European central bank (ECB) president.

Earlier the ECB had kept the Eurozone interest rate at 4.25 per cent, resisting pressure for a cut.

Meanwhile, Dmitry Medvedev, the Russian president, said that the era of US global economic dominance was over and the world now needed a new and "more just" financial system.

Addressing a Russian-German development forum in St Petersburg, with Angela Merkel, the German chancellor, at his side, Medvedev said: "The time of domination by one economy and one currency has been consigned to the past once and for all."

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