Europe stocks up after Senate OKs rescue plan

European shares rose in choppy early trade on Thursday, supported by the passage of a $700 billion bailout package for the financial sector by the U.S. Senate, but concerns persisted about the health of banks.

At 0718 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,076.72 points, after closing 0.9 percent higher the previous session. The benchmark has lost more than 28 percent so far this year.

Banking stocks were the top-weighted gainers on the index, with HBOS rising 9.2 percent, Lloyds TSB up 3.4 percent and Fortis gaining 5.7 percent.

Switzerland's UBS rose 7 percent after the bank said it would make a small profit in the third quarter after a year of losses, signalling it had started to turn the corner even as the credit crisis still engulfed many U.S. and European peers.

Investors awaited the European Central Bank's rate decision at 1145 GMT. The bank is expected to keep rates on hold at 4.25 percent, but its views on the global financial crisis will be scrutinised by the market.

"There is mounting pressure on the central bank to cut key rates to help crisis-ridden banks and ward off the increasing risks to the economy," German bank Helaba said.

The support for the banking sector came from the U.S. Senate, which approved the rescue package late on Wednesday, putting pressure on the House to approve a plan that political and financial leaders called crucial to averting economic catastrophe.

The revised legislation is aimed at reinvigorating worldwide credit markets and interbank lending which had frozen up while overleveraged financial institutions staggered under the weight of failed mortgages.

But market participants warned that the rescue package is not a cure-all, with a worsening economic outlook spurring calls for central banks to cut interest rates.