Financial markets rallied today as the White House and the Republicans agreed on a deal to raise the debt limit on Sunday night. The plan has to await approval by the Congress. While it remains a long road for the US devise a feasible long-term plan to reduce deficits to an acceptable level, the deal helps avoid a default and alleviates market worries in the near-term. Stocks advanced with the MSCI Asia Pacific Index rising more than +1%. In the commodity sector, the front-month contract for WTI crude oil soared to 97 from Friday's close of 95.7 while the equivalent Brent crude contract climbed to 118 from 116.74 on Friday. Increases in risk appetite dampened gold, sending the benchmark contract to as low as 1608.2 from the record close of 1631.2 last week.

President Barack Obama said t that both the House and the Senate had reached an agreement to raise the debt ceiling by 2.1 trillion, an amount adequate to satisfy the country's borrowing needs through 2013, and cut the deficit by as much as 2.5 trillion over a decade. Obama stated that 'the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default...This compromise does make a serious down payment on the deficit-reduction we need. Most importantly it will allow us to avoid default'.

The plan will likely be passed in the Congress so the next event would be actions by rating agencies. S&P said last month that it may cut US' AAA rating in as soon as August if the government fails to come up with a credible plan to reduce deficit. Moody and Fitch said they would lower US' rating should the government fails to raise the debt ceiling limit by the August 2 deadline.

On the dataflow, we will have a series of manufacturing data today. China's manufacturing PMI eased to 50.7 in July from 50.9 in the prior month. The market had expected a deeper slowdown to 50.2. Similar data compiled by HSBC showed a drop to 49.3 in July from 50.1 in June. A reading below 50 signaled contraction in manufacturing activities. In European session, UK's manufacturing PMI probably slipped 0.3 points to 51 in July while the final estimate for Eurozone's PMI should stay unchanged at 50.4. In the US, the ISM manufacturing index might have eased to 55 in July from 55.3 a month ago.