WASHINGTON - THE US government agreed on Friday to an emergency loan of US$13.4 billion (S$19.5 billion) to ailing automakers to stave off collapse of the sector that could deal a crippling blow to the economy.

General Motors and Chrysler were expected to draw on the funds immediately to avert bankruptcy, and will be required to implement new belt-tightening moves and demonstrate their long-term viability.

NEW YORK - US stocks headed higher in opening trade on Friday after the US government offered automakers a US$13.4 billion (S$19.5 billion) rescue to avert a collapse of a major sector of the economy.

The Dow Jones Industrial Average rose 65.55 points (0.76 per cent) to 8,670.54 and the tech-rich Nasdaq leapt 22.74 points (1.46 per cent) to 1,575.11.

OIL prices were up slightly on Friday after a sharp decline overnight as investors weighed the impact of the global economic slowdown on crude demand against oil producers' decision to slash output.

Light, sweet crude for February delivery was up 56 cents to US$42.23 (S$61.50) a barrel in electronic trading on the New York Mercantile Exchange by mid-afternoon in Europe. The contract overnight fell US$2.94 to settle at US$41.67.