Asian markets sink as US debt ceiling talks stall

Asian markets tracked losses in Wall Street on Wednesday as investors grow increasingly concerned about stalled US debt ceiling talks to avert a painful default.

The optimism that flowed through trading floors at the start of the week has given way to trepidation, with several Republicans questioning an early June deadline, and some even saying the country is nowhere near running out of cash anyway.

All eyes are now on Washington, where President Joe Biden and House Speaker Kevin McCarthy have had a number of meetings to find a path to lifting the borrowing limit from the current $31.8 trillion.

The two men said Monday that talks had been “productive” and were confident a deal would be coming.

Republicans have set cutting spending next year to 2022 levels as a “red line”, but Democrats have so far refused to commit to that.

On Tuesday, Republican Representative Ralph Norman warned that McCarthy had said the two sides were “not anywhere near close” to an agreement.

The Speaker also tweeted: “With just 9 days left to go, Republicans remain the only ones in Washington who have actually done anything to lift the debt limit and avoid default.”

However, White House Press Secretary Karine Jean-Pierre struck a more upbeat tone, saying: “We are seeing movement.”

“Both sides have to understand that they’re not going to get everything that they want.”

The impasse comes as some Republicans say they do not believe warnings from the Treasury and Congressional Budget Office (CBO) that the coffers are about to run dry.

Treasury Secretary Janet Yellen said an agreement must be reached by June 1 otherwise the United States risks defaulting on its debt repayments, which most economists warn could spark turmoil in the global economy and markets.

The CBO, the Bipartisan Policy Center and banking giants including Goldman Sachs have also penciled in the first few weeks of next month as the period when the crisis could come to a head.