Tokyo shares up 1.34pc on US debt deal

The benchmark Nikkei-225 index gained 131.98 points to 9,965.01, after temporarily topping the psychologically important 10,000 mark. The Topix index of all first-section issues grew 1.23 percent, or 10.33 points, to 851.70.

"I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy," Obama said at the White House.

Leaders of the Democratic-held Senate and the Republican-led House of Representatives said they would present the framework to their rank-and-file on Monday ahead of final votes to approve the deal.

If approved, the deal will raise the $14.3 trillion debt ceiling by at least $2.1 trillion -- enough to reach 2013 -- and entail cuts of $2.5 trillion dollars in two rounds, an official said Sunday.

The US government hit its debt limit in May and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally -- but can only do so until August 2.

Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 percent in the wake of the 2008 global meltdown.

"The debt-ceiling issue had been disturbing the market and spawned risk aversion since last week," noted Kazuhiro Takahashi, a general manager at Daiwa Securities' investment strategy and research.

"As President Obama announced a deal, lost ground is being regained," he said.

However, he added: "This is not a factor that makes investors picture higher growth for the US economy. The market is reacting to the fact that what should have been settled earlier has finally been done so after a political game."

Yutaka Yoshii, general manager at Mito Securities, told Dow Jones Newswires: "We don't know yet how the ratings agencies will respond to the US debt agreement."

"Once the initial market enthusiasm dies down, there is a possibility that investors will once again focus on the weaker-than-expected US GDP figures" released Friday, Yoshii said.

The Dow sank 0.79 percent on Friday, weighed by data showing the US economy saw weaker-than-expected 1.3 percent growth in the second quarter after 0.4 percent in the first, and nervousness over the debt battle.

Shares of Japanese banks that hold a large amount of US Treasury bonds were higher as concerns waned over possible US credit downgrades that might have been triggered by a default, dealers said.

Earnings results from the big banks released Friday after the market close were also supportive.

Mitsubishi UFJ Financial Group was up 4.08 percent at 408 yen after posting a record group net profit for the three months to June. Sumitomo Mitsui FG was up 2.91 percent at 2,505 yen, and Mizuho FG gained 2.36 percent to 130 yen.

Shares in Nintendo slipped 1.06 percent to 12,140, a six-year low, after tumbling 12.2 percent Friday after the company slashed the price of its 3DS console due to weak sales and posted a first-quarter loss.

Copyright AFP (Agence France-Presse), 2011