Politicians reach deal to end U.S. debt crisis

CNBC

Published: Sunday, 31 Jul 2011 | 9:34 PM ET

WASHINGTON - President Barack Obama said on Sunday that Democrat and Republican leaders had reached an agreement to reduce the U.S. deficit and avoid default, but it was not clear if the spending cuts were deep enough to stave off a credit rating downgrade.

The White House said the compromise would cut about $2.5 trillion from the deficit over the next 10 years but the reductions would not happen so quickly that they would drag on the fragile U.S. economy.

The deal would still have to be passed in the House and the Senate ahead of an Aug 2 deadline to avert a potential debt default.

U.S. S&P 500 stock futures bounced 1.5 percent and U.S. 

Treasuries futures slid on news of the deal. Gold and the yen fell.

Credit rating agencies had indicated earlier that deficit-cutting measures of around $4 trillion would be enough for the U.S. to avoid losing its prized AAA rating. Moody's said on Friday that it may keep the rating unchanged but with a negative outlook, meaning there was a risk of a downgrade in the medium-term.