NEW YORK (CNNMoney) -- World markets climbed higher Monday, after President Obama and lawmakers announced they had reached a deal to raise the U.S. debt ceiling and reduce federal spending.

Tokyo's Nikkei (NKY) index led the gains, ending up 1.3%, while Hong Kong's Hang Seng (HSI) jumped 1%. China's Shanghai Composite (SHCOMP) only rose 0.1%, after a report showed that Chinese manufacturing activity continued to slow in July, according to the latest Purchasing Managers Index or PMI.

Meanwhile, London's FTSE 100 rose 1.3%, Germany's DAX advanced 0.6% and France's CAC 40 added 1%.

Investors around the world breathed a sigh of relief, after Washington announced that top lawmakers has come to agreement to raise the debt ceiling for 2 years and cut $1 trillion to start.

But they remained somewhat cautious, as the agreement still requires congressional approval. The deal is expected to go up for votes Monday.

"Asia was expecting a last minute deal," said Yonghao Pu, chief investment strategist, UBS wealth management.

He cautioned that the relief rally may only last a few days as investors refocus on job growth, housing and corporate earnings.

"Markets will battle between the weak economic outlook and positive corporate earnings," said Pu.

Meanwhile, trading in U.S. stock futures -- which indicates how stocks will start trading when the U.S. markets officially open -- were decidedly higher. S&P 500 (SPX), Nasdaq Composite (COMP) and Dow Jones industrial average (INDU) futures were all up more than 1%.