World Markets Rally on 11th Hour U.S. Debt Deal

Equity markets around the world rose broadly Monday, as optimism grew late Sunday that legislators in Washington had reached a deal to raise the U.S. debt ceiling before Tuesday's deadline.

European shares bounced back from some of last week's losses, with London's FTSE Index gaining more than 1.3%, and Germany's DAX Index gaining 0.9%. Shares also got a boost from Europe's biggest bank, HSBC (NYSE: HBC), which announced positive earnings and a deep cost-cutting initiative aimed at cutting 30,000 jobs.

Stocks in Asia closed higher on the day, with Japan's Nikkei Index rising 1.34%. The benchmark rose jumped as high as 10,040, before retracing to below 9,970. China's Shanghai Index finished slightly higher.

Global investors also pared some of their safety trades in gold Monday, with the metal losing more than $12, to below $1,619 an ounce.

Though legislation must still pass through the House and Senate, prospects brightened for the first time in weeks late Sunday afternoon. Legislators have battled over potential tax reform and social spending cuts as the August 2 deadline fast approached. Both chambers of Congress are expected to vote on the measures Monday.

"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," President Barack Obama told reporters at the White House Sunday.

"I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days," Obama noted.

While most market commentators largely expected a deal to happen before the deadline was reached, investors around the world grew increasingly anxious as Tuesday's midnight deadline loomed. Stocks fell broadly last week, as difficult budget negotiations sent markets tumbling.

The proposed deal would cut $900 billion from the budget over the next 10 years, and an additional $1.5 trillion in savings would be found by a new Congressional committee.