US shares rose as a result, as investors were optimistic of the plan being approved within days. .
At 10.15am (AEST), the benchmark S&P/ASX200 was up 52 points, or 1.06 per cent, at 4979.4 points, while the broader All Ordinaries was 48.6 points stronger, or 0.98 per cent, at 5009.4. The December share price index futures contract was up 37 points at 5,031, on a volume of 6,589 contracts.
The banking sector and big miners led the gains.
Commonwealth Bank of Australia rose 77 cents, or 1.75 per cent, to $44.82, National Australia Bank added 57 cents, or 2.28 per cent, to $25.56, while ANZ Banking Group gained 49 cents, or 2.65 per cent, to $19.01.
Westpac lifted 38 cents, or 1.59 per cent, to $24.42 and its takeover target St George Bank improved 30 cents to $31.60.
Macquarie Group added 64 cents, or 1.63 per cent, to $39.89 after announcing plans to sell its investment lending business in Australia.
Babcock & Brown rose 55 cents, or 23.21 per cent, to $2.92.
Miner BHP Billiton gained 35 cents to $36.75, while takeover target Rio Tinto lifted $1.22, or 1.2 per cent, to $103.08.
On Wall Street overnight the Dow rose 196.89, or 1.82 per cent, to 11,022.06, erasing some of the losses from heavy selling earlier in the week. The Standard & Poor's 500 index advanced 23.31, or 1.97 percent, to 1209.18 and the Nasdaq composite index rose 30.89, or 1.43 percent, to 2186.57.
Aequs Securities institutional dealer Ric Klusman said the news from the US and higher commodity prices were driving this morning's gains.
"I guess they're just reacting to the Dow overnight being up, as well as copper and all of those commodities being up a little bit,'' Mr Klusman said.
"It probably is being tempered by the Asian US futures, which are already down 110 points ... so most people think it's going to tail off this afternoon.''
The US government bailout looks likely to be implemented, Mr Klusman said, but doubts remain over its effectiveness.
"We've already had about $US400 billion put into the market, so some people are saying `I wonder if its going to have any impact at all','' he said.
At 10.24am AEST, spot gold was trading in Sydney at $US880.55 an ounce, down $US11.15 on yesterday's close of $US891.70.
Newcrest Mining rose seven cents to $27.53, while Newmont Mining dropped 13 cents, or 2.57 per cent, to $4.92, and Lihir Gold lost six cents, or 2.14 per cent, to $2.74.
The energy sector was higher, after crude oil prices rebounded on hopes the US bank bailout would stabilise the US economy and boost energy demand.
Woodside Petroleum added 11 cents to $57.43, Santos gained 29 cents, or 1.44 per cent, to $20.49, and Oil Search rose nine cents to $5.91.
Foster's Group has elevated acting chief executive Ian Johnston to head of the company, following the departure of Trevor O'Hoy. Foster's shares were 22 cents stronger, or 4.11 per cent, at $5.57.
AWB says a class action filed against the wheat company in the US by two Iraqi widows has been dismissed. AWB shares were up one cent, or 0.34 per cent, at $2.96.
In retail, Woolworths had added 30 cents, or 1.08 per cent, to $28.20, while Wesfarmers, which owns Coles and Bunnings, was up 50 cents, or 1.7 per cent, to $29.97.
David Jones shares lost 11 cents, or 2.4 per cent, to $4.47, and Harvey Norman lifted three cents to $3.53.
Market turnover was 439.56 million shares, valued at 3.19 million, with 380 stocks up, 287 down and 224 unchanged.
Shares fall on US rescue concerns
