Markets were mixed Thursday after the US House passed a bill to avoid a painful default, but as traders turn their attention to the Federal Reserve's next policy meeting and China's struggling economy.
After weeks of brinkmanship, Democrats and Republicans came together to push through an agreement to lift the debt ceiling in rare bipartisan cooperation.
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."
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."
Still, after a strong start to the day, worries over the chances of a Fed interest rate hike and ongoing weakness in China's economy dampened the mood.
Tokyo, Sydney, Wellington, Singapore and Mumbai rose but Shanghai was flat while Hong Kong, Seoul, Taipei, Manila and Bangkok slipped.
London, Paris and Frankfurt edged up in the morning.
China worries linger
Focus will now turn to the release of US jobs data on Friday, which will be pored over for an idea about the state of the world's top economy.
Continued strength in the labour market has been a key factor in the Fed's decision to keep hiking rates for more than a year as it tries to rein in inflation.
On Wednesday, data showing an unexpected jump in job openings did little to soothe investor concerns the central bank could lift again later this month.
The figures come after the Fed's preferred gauge of inflation picked up pace in April.
Suggestions from some officials that they should take a breather from hiking at the next policy meeting provided investors with a little hope.
"Market calls that the Fed is done hiking won't be able to shake off this labour market strength if Friday's (jobs) report confirms this trend," said OANDA's Edward Moya.
"Wage pressures will push inflation higher, which should seal the deal for more Fed rate hikes."
And China's economy continues to show signs of fragility as the initial rally after the lifting of zero-Covid measures last year fades.
On Wednesday, figures showing the country's vast manufacturing sector contracted further last month highlighted the big job Beijing faces in kickstarting growth.
But there was some good news Thursday in a private survey that suggested it had expanded slightly. The Caixin manufacturing index data beat estimates for a contraction.
"The optimism that characterised the rebound in economic activity in the early part of this year has given way to a realisation that Chinese demand may well remain lacklustre for a while to come," said Michael Hewson at CMC Markets.
"It's not as if the signs of a weakening Chinese economy haven't been there, they've been apparent in Chinese factory gate inflation which has been stuck in negative territory since October of last year."
The release next week by China of inflation and trade data will be closely tracked by investors for fresh clues about the outlook.
