Stocks rise, euro slips on Greek debt progress

European markets closed with modest gains, coming off early highs as they digested a second Greek rescue, judging it to be a step in the right direction even if failing to dramatically improve the country's debt position.

Dealers said the accord, however, was at least good enough to buy some considerable time to manage the debt problem, leaving open the question of whether the eurozone can eventually resolve the crisis for good.

"The latest breakthrough on a second bailout for Greece is enough to keep the markets happy for the next few months," said Kathleen Brooks, research director at trading group Forex.com.

"It's holiday season, people are dreaming of sandy beaches, so we think the markets will accept this plan as more of a plaster cast than a band-aid that will go some way at least to sorting out Greece's problems."

Attention turned in the afternoon to Washington where President Barack Obama and his Republican opponents appeared to be making no headway in talks on the deficit, with an agreement needed by August 2 to avoid a potentially devastating US default.

In London, the benchmark FTSE 100 index of top shares closed up 0.60 per cent at 5,935.02 points. In Frankfurt, the DAX added 0.50 per cent to 7,326.39 points and in Paris the CAC 40 rose 0.68 per cent to 3,842.70 points.

Other European markets posted similar gains.

The euro was weaker at $1.4369 in late London trade, down from $1.4425 in New York late Thursday when it hit a two-week high of $1.4439 in the wake of Thursday's Greek debt deal. The dollar was little changed at 78.40 yen after 78.43 yen.

The eurozone agreed at an emergency summit to put up 159 billion euros ($229 billion) for Greece with private creditor help and deployed a safety net for future crises.

"There were three issues to deal with ... that investors were keeping an eye on," said Joshua Raymond, chief market strategist at City Index traders.

"The details of the second Greek bailout, steps taken to prevent debt contagion and the amount of expected liabilities for private lenders, ie banks. On all three of the fronts the market is giving the plans the thumbs up but in the long term I think we remain some way off from a high-five."

In New York, stocks were mixed, waiting on news from Washington as General Electric and McDonald's reported second-quarter profits beating expectations while industrial giant Caterpillar fell short.

The blue-chip Dow Jones Industrial Average was down 0.34 per cent at around 1600 GMT while the tech-heavy Nasdaq Composite added 0.36 per cent.

The US market jumped 1.21 per cent on Thursday as news of the Greek deal came through so there was little new on that front to go on, leaving investors to worry about debt problems closer to home.

"The market is now left hanging on the edge ... as it awaits direction from the debt ceiling negotiations in Washington," said Patrick O'Hare, an analyst with Briefing.com.

"Good earnings has enabled the market to keep a firm grip on things yet it is cognizant that the risk of losing grip builds as each day passes without a credible compromise," he added.

In Asian trade earlier Friday, Tokyo rose 1.22 per cent, Sydney climbed 1.03 per cent and Hong Kong jumped 2.08 per cent while Shanghai added 0.18 per cent.