U.S. stock index futures rose on Monday as Abu Dhabi moved to bail out neighboring Dubai, winding down fears of a potential default that had rattled markets, and as Citigroup Inc reached a deal to pay back $20 billion of U.S. government funds.

Abu Dhabi's aid, worth $10 billion, included $4.1 billion for an Islamic bond maturing on Monday. But Dubai said Dubai World creditors still needed to approve a standstill on outstanding debt.

Citigroup said it had reached a deal with U.S. regulators to repay $20 billion of shares held by the government by issuing $17 billion of stock and allowing it to exit the TARP program in 2010.

Citi shares fell 2.3 percent to $3.86 in premarket trading, while the Select Sector SPDR Financial exchange-traded fund rose 1.7 percent.

By Citigroup agreeing to pay back TARP bailout money, investors will have seen the last of the big banks exit the TARP program and bringing back a feeling of confidence, said Andrew Bakhos, president of Princeton Financial Group in North Brunswick, New Jersey.

He said the Abu Dhabi aid looks to be a positive this morning, reassuring investors and adding a bit of security where there once had been uncertainty.

S&P 500 futures rose 5.4 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 49 points and Nasdaq 100 futures added 8.5 points.

Britain's Cadbury Plc said it has received interest from other bidders after raising its growth targets and reporting upbeat trading as it dismissed a $16.5 billion bid from Kraft Foods Inc .

Sun Microsystems Inc shares jumped 10 percent in premarket trading after European Union regulators signaled they could clear Oracle Corp's $7 billion takeover of Sun after Oracle promised measures to ease competition concerns.

Crude futures fell more than 1 percent to below $69 per barrel, down for a ninth straight session.

The Dow and S&P 500 closed up for a third straight session on Friday after several solid consumer-related reports reinforced investors' confidence in a steady economic recovery.

(Editing by Padraic Cassidy)