Deal in sight, global markets look up to Monday

By David K. Randall and Jonathan Fahey AP Business Writers

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Investors said an agreement announced Sunday night to raise the federal government's borrowing limit staves off a possible market disaster.

Major stock indexes in Asia and U.S. stock futures rose sharply after President Barack Obama and Congressional leaders disclosed the details of the plan, which is aimed at avoiding a possible debt default by the U.S. government after Tuesday.

"I think this spells relief on Wall Street," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, shortly after the agreement was announced at 8:40 p.m.

Japan's benchmark Nikkei index was the first major stock market to open for trading, at 8 p.m. Eastern time on Sunday. Even before Obama's televised statement at 8:40 p.m., the Nikkei was up 1.3 percent. After the president spoke, the Nikkei's gains hit 1.8 percent. Other markets also rallied on the news:

-- Hong Kong's Hang Seng opened less than an hour later and quickly gained 1.5 percent.

-- In Australia, the S&P/ASX 200 index was up 1.9 percent.

-- In Seoul, the main market index, the KOSPI composite index, was up 1.9 percent.

-- Dow futures were up 182 points, or 1.5 percent. Future contracts for the broader S&P 500 index rose 1.6 percent. When futures are up during off-hours trading, stocks typically rise when the market opens.

But some investors are still concerned that the deal won't get through Congress. The agreement must be approved the House of Representatives and the Senate. Still, Sunday night's rise in Dow futures suggests many investors believe a deal will pass.

The agreement would cut at least $2.4 trillion from federal spending over a decade but does not include tax increases on wealthy Americans to reduce deficits, something the president had wanted. The deal also raises the country's debt limit by $2.1 trillion, to about $16.5 trillion, which will allow borrowing through the end of 2012. The Treasury Department has said that after Tuesday the U.S. government won't have enough money to meet all of its financial obligations if Congress doesn't raise the nation's debt ceiling.

Under the agreement, a new joint committee of Congress would recommend deficit reductions by the end of November. Those would be put to a vote in Congress by year's end. The committee's recommendations could include changes in tax laws as a way to raise revenue.

If a deal is approved, John Brady, a senior vice president for futures and options at MF Global believes "stocks will rally, and stocks will rally big."

But he said that Monday could be an up and down day for U.S. markets. Stocks will rise if the deal looks to be on track and will fall if news leaks that it might be in trouble. If the deal fails to pass in Congress, he said: "The rally will be torpedoed."Continued...