WASHINGTON (Reuters) – US lawmakers appeared close to a final agreement yesterday on a massive $700 billion bailout to save the financial system, lifting world stock markets and sending the dollar higher.

News of a tentative agreement stabilised beleaguered money markets, frozen by a reluctance by banks to lend. The rate on one-month US Treasury bills shot higher as traders unwound safe-haven trades.

Still, officials from France to China voiced alarm.

"A crisis of confidence without precedent is shaking the global economy," French President Nicolas Sarkozy said in a speech in Toulon, France.

The apparent breakthrough on a $700 billion rescue plan was sealed ahead of a 5 p.m. emergency meeting with President Bush and the two men battling to succeed him, Democrat Barack Obama and Republican John McCain.

As that meeting began, Bush told reporters: "We're in a serious economic crisis in the country if we don't pass a piece of legislation. My hope is that we can reach agreement (on a bailout) very shortly." (Analysis: Page 27)

Sen. Christopher Dodd, chairman of the Senate Banking Committee, said House and Senate negotiators had reached "fundamental agreement" on a set of principles guiding a bailout bill.

Predicting an evening of horse-trading before a final agreement is reached, the House Republican leader said his party has not yet agreed to a deal, but progress was encouraging.

Rep. John Boehner of Ohio said in a statement: "I am encouraged by the bipartisan progress," but added, "House Republicans have not agreed to any plan at this point."

But other Republicans were more encouraged. Republican Sen. Robert Bennett of Utah, after a closed-door meeting of lawmakers negotiating the bailout package, said, "We now expect that we will have a plan that can pass the House, pass the Senate and be signed by the president."

Rep. Barney Frank, the powerful Democratic chairman of the House Financial Services Committee, said the deal would give the money to the US Treasury in installments rather than a $700 billion lump sum the Bush administration wanted.

The enormity of the deal, which would cost every man, woman and child in the United States about $2,300, led many lawmakers to ask Treasury Secretary Henry Paulson during two days of rancorous hearings this week if he would take the money in installments.

The bailout is more that the total lending by the International Monetary Fund since its inception after the Second World War. The IMF has loaned $506.7 billion since 1947 to countries in crisis as far flung as Argentina, Britain, Turkey and South Korea.

Frank also said the deal would allow the government to take part-ownership of banks, ban companies who sell toxic assets to the government from paying massive "golden parachutes" to executives being fired and include measures to help some Americans avoid losing their homes.

The swirl of political theater and meetings in Washington followed fresh turbulence in the world economy.

Orders for costly US manufactured goods plunged in August, new-home sales hit a 17-year low, while new claims for jobless benefits shot up last week, according to government reports that showed the world's largest economy rapidly weakening. (Story, Page 28)

Top US industrial conglomerate General Electric Co , widely seen as a bellwether of the U.S. economy, issued a profit warning, citing "unprecedented weakness and volatility" in the financial services market. (Story, Page 27)

Shares of struggling savings and loan Washington Mutual Inc fell 25 percent on Thursday as its possible sale was held up as it waits to see if any deal would get government support.

The crisis reverberated in Amsterdam and Brussels, where Fortis NV, the Belgian-Dutch financial services group, denied a rumor the Dutch Central Bank had asked a Fortis rival to support the company's liquidity position. Fortis shares sank as much as 21 percent to 14-year lows. (Story, Page 30)

In Asia, hundreds of people lined up outside the Hong Kong branches of the Bank of East Asia Ltd., some sleeping there overnight, to withdraw their savings amid fears the bank could be Asia's first victim of the year-old credit crisis.

China's banking regulator sought to reassure jittery financial markets, denying a report it had told local banks to stop lending to US banks and stressing that foreign bank operations in China were healthy.