Hopes that lawmakers are edging closer to a deal to hike the US debt ceiling lifted spirits in Asia on Friday, though traders remain nervous as a deadline to avert a calamitous default draws closer.
Markets have taken a hit in recent days on worries about the slow pace of negotiations in Washington, even after President Joe Biden and House Speaker Kevin McCarthy expressed optimism earlier in the week.
On Thursday, Biden reiterated his pledge that "there will be no default" despite the wrangling, adding that talks with McCarthy, who leads the Republican negotiators, had been "productive".
For his part, the Speaker also expressed his determination to get an agreement to raise the borrowing limit by June 1, when the Treasury has warned the government is expected to run out of cash to service its debts.
"We know where our differences lie," he said. "We do not have an agreement yet. We knew this would not be easy. It's hard, but we're working. And we're gonna continue to work till we get this done." Reports said the two camps were edging towards a deal that would lift the debt ceiling and cap spending for two years. Pressure for a deal was ramped up Wednesday after Fitch placed the country's AAA-ranked credit on "rating watch negative" owing to the standoff. The announcement raised the possibility of a first downgrade since another ratings agency, S&P Global, did so during a similar standoff in 2011.
But there is still plenty of rancour on Capitol Hill, with some Republicans even questioning whether the United States is even likely to default at all, despite warnings about the potential economic chaos it would cause.
Meanwhile, Democratic minority leader Hakeem Jeffries said Republicans had abandoned their jobs in Washington to go on holiday.
"And these Republicans, they're going to say that Joe Biden refused to sit down with them," he added.
Still, the broad consensus is for the borrowing limit to eventually be raised at the 11th hour, after a period of brinkmanship.
- 'Hard deadline' -
Wall Street had a mixed Thursday, with the Nasdaq and S&P 500 surging higher thanks to a rally in tech firms fuelled by a blockbuster sales forecast from chip giant Nvidia.