Greek agreement lifts equities, but doubts remain

European equities jumped almost 2 percent while Wall Street gained about 1 percent after euro zone leaders made Greece surrender much of its sovereignty to outside supervision in return for agreeing to talks on an 86-billion-euro bailout.

However, investors remained anxious that a deal was not entirely in hand and that international lenders, led by Germany, obliged leftist Prime Minister Alexis Tsipras to abandon his promises of ending austerity.

"This is not over yet. In fact it might be far from over," said Anthony Lawler, a portfolio manager who invests in hedge funds at investment firm GAM in London. "It is not at all certain that the Greek government will accept what is proposed."

The euro fell more than 1 percent as the Greek deal renewed focus on the prospect that the U.S. Federal Reserve might hike interest rates in September. The euro fell 1.43 percent to $1.1002, briefly weakening to below the psychologically important level of $1.10. The dollar gained 0.52 percent to 123.42 yen.

The euro zone's blue-chip Euro STOXX 50 index hit a two-week high, closing up 1.8 percent, while the pan-European FTSEurofirst 300 index gained 1.9 percent to close at 1,572.05.

MSCI's all-country world stock index rose 0.8 percent.

"We're seeing a relief rally," said Andrew Milligan, global head of strategy at Standard Life Investments in Edinburgh. "As we go through the details, however, it's very clear that there is a sizeable number of hurdles to jump over, especially in Athens."

On Wall Street, the Dow Jones industrial average rose 192.05 points, or 1.08 percent, to 17,952.46. The S&P 500 gained 19.48 points, or 0.94 percent, to 2,096.1 and the Nasdaq Composite added 65.51 points, or 1.31 percent, to 5,063.21.

U.S. Treasury yields rose, but soon pared much of their gains, while yields on low-rated government debt in Europe closed the gap on safe-haven German alternatives.

Benchmark U.S. Treasury 10-year notes were last down 4/32 in price to yield 2.4300 percent.

The gap between Italian and German bond yields narrowed to a two-month low of 1.14 percentage points in early trading, but later widened to the 1.23 percent level seen three weeks ago.

Oil prices came off their lows after an Iranian official indicated the Islamic Republic might miss another deadline in securing a nuclear deal integral to lifting Western sanctions on its crude exports.

Crude futures had fallen nearly $2 a barrel on reports that Iran and world powers were closing in on a deal that would allow Iranian oil to re-enter an over-supplied market.

Brent crude for August fell 88 cents to settle at $57.85 a barrel. U.S. light crude, also known as West Texas Intermediate (WTI), settled down 54 cents at $52.20 a barrel.