US House votes to avert default

Gulf Today Report

A majority of the US House of Representatives voted on Wednesday to approve a bipartisan bill to suspend the government's $31.4 trillion debt ceiling, just five days before the deadline to avoid a crippling default.

Voting continued on the legislation, which must also be approved by the Democratic-majority Senate before President Joe Biden can sign the measure into law.

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Meanwhile, markets mostly rose Thursday after the US House passed a bill to avoid a painful default, as traders turn their attention to the Federal Reserve's next policy meeting and China's economy.

After weeks of brinkmanship, Democrats and Republicans came together to push through an agreement to lift the debt ceiling in rare bipartisan cooperation.

Kevin McCarthy speaks to members of the media at the US Capitol in Washington on Wednesday. AFP

Hardline Republicans had warned they would shoot the deal down, saying it did not have enough spending cuts, and some Democrats were also angry at the reductions made.

The bill now goes to the Senate before President Joe Biden can sign it off, allowing the government to borrow more cash to service its mammoth debts.

Failure to do so before the cash run out — said to be June 5 — would have resulted in a default that many warned would hammer the global economy and markets.

After the vote, Biden said in a statement: "Tonight, the House took a critical step forward to prevent a first-ever default and protect our country's hard-earned and historic economic recovery.

"The only path forward is a bipartisan compromise."

US Senate Minority Leader Mitch McConnell speaks during a news conference in Washington on Wednesday. AFP

House Speaker Kevin McCarthy, who drew up the deal with Biden after weeks of wrangling, said: "Passing the Fiscal Responsibility Act is a crucial first step for putting America back on track.

"It does what is responsible for our children, what is possible in divided government, and what is required by our principles and promises."

Asian investors largely welcomed the passage. Hong Kong, Tokyo, Sydney, Singapore, Wellington and Mumbai all rose, while Shanghai held just above water. Seoul, Manila, Bangkok and Taipei struggled, though.

London, Paris and Frankfurt rose at the open.