Asian stock markets surged on Monday after US President Barack Obama said lawmakers had reached a last-minute deal that would raise the country's debt ceiling and avoid a catastrophic default. Tokyo closed 1.34 percent, or 131.98 points, higher at 9,965.01 and Seoul gained 1.83 percent, or 39.10 points, to 2,172.31 while Sydney closed 1.65 percent, or 73.2 points, up at 4,497.8. Hong Kong rose 0.99 percent, or 223.12 points, to 22,663.37 but Shanghai ended flat, edging up just 2.05 points to 2,703.78. And in early European trade London's FTSE 100 leapt 1.04 percent, the Frankfurt DAX 30 added 1.34 percent and the CAC 40 in Paris rallied 1.28 percent. "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 late Sunday in Washington. The deal will raise the country's $14.3 trillion debt ceiling by about $2.4 trillion in two steps, while calling for roughly the same amount in spending cuts over 10 years. However, the bill must still pass through both houses of Congress, and Obama urged lawmakers "to do the right thing and support this deal". Traders worldwide have been on edge for weeks as the White House and Democrats squabbled with Republicans over how to make enough budget cuts to allow a hike in the debt limit. A default by the United States, the world's richest country, would send shudders through the global economy that could lead to another financial crisis. The news briefly lifted the dollar -- after a steady sell-off last week as Democrats and Republicans struggled to come to an agreement -- but it soon eased back. The greenback, which rose above the 78 yen level after the deal, was at 77.44 yen in Tokyo afternoon trade, up from 76.73 yen in New York late Friday. The euro fetched $1.4399 against $1.4395. The European single unit rose to 111.48 yen from 110.41 yen. "The debt-ceiling issue had been disturbing the market and spawned risk aversion since last week," said Kazuhiro Takahashi, a general manager of investment strategy and research at Daiwa Securities. "As President Obama announced a deal, lost ground is being regained." However, he sounded a note of caution, adding: "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." Analysts also pointed out that data from the United States last week showed stagnant growth in the first half of 2011, raising fresh concerns of a recession. The Commerce Department said gross domestic product grew only 1.3 percent in the second quarter, after 0.4 percent in the first, the weakest growth since the economy officially exited recession two years ago. Both numbers were much lower than earlier forecasts -- originally first-quarter growth had been put at 1.9 percent -- and raised doubts about widespread forecasts of a 3.0 percent-plus pace for the rest of the year. Eyes will be on the release on Friday of key non-farm payroll figures, with concerns that the economy is coming to a halt. Oil rallied on the debt deal announcement. New York's main contract, light sweet crude for delivery in September, surged $1.18 to $96.88 per barrel in the afternoon. Brent North Sea crude gained $1.35 to $118.09. Gold closed in Hong Kong at $1,615.00-$1,616.00 an ounce, up from Friday's finish of $1,612.00-$1613.00. In other markets: -- Taipei rose 0.66 percent, or 57.20 points, at 8,701.38. Taiwan Semiconductor Manufacturing Co was 0.83 percent higher at Tw$72.6 while Formosa Plastics was 7.0 percent down at Tw$101.0. -- Manila closed 1.04 percent, or 46.90 points, higher at 4,550.53. Top-traded Philippine Long Distance Telephone Co. was unchanged at 2,400 pesos while Alliance Global Group gained 3.62 percent to 12 pesos and Metropolitan Bank and Trust Co. ended up 2.66 percent at 79 pesos. -- Wellington ended 0.54 percent, or 18.21 points, lower at 3,413.84. Fletcher Building gained 1.2 percent to NZ$8.23 and Mainfreight rose 2.1 percent to NZ$10.72.