Biden and McCarthy Both Say "No US Default"... New York Stock Market Rises Over 1% (Comprehensive Report 2)

Amid warnings that the United States could face an unprecedented debt default as early as June, both President Joe Biden and Republican House Speaker Kevin McCarthy expressed confidence that there will be no default and that a deal will be reached. Buoyed by optimism over an agreement, risk appetite revived, and the New York stock market indices all rose by over 1%. International oil prices also climbed nearly 3%.

Biden and McCarthy United: "No Default Expected"

On the 17th (local time), before departing for Japan to attend the Group of Seven (G7) summit, President Biden stated at a press conference, "I am confident that we can reach an agreement to prevent the United States from defaulting (by raising the debt ceiling)." This remark was interpreted as an effort to emphasize his willingness to negotiate and alleviate growing concerns about default after a second meeting with congressional leaders the previous day failed to produce any concrete results.

Regarding the fruitless meeting the day before, he emphasized, "All the leaders present know that if we fail to pay our bills, it would have catastrophic consequences for the U.S. economy and the American people," adding, "Everyone agreed that we will not fall into default." Currently, President Biden has shortened his overseas trip schedule to focus on the debt ceiling negotiations. Originally, in addition to Japan, where the G7 summit is held, he planned to visit Papua New Guinea and Australia, but these two visits were canceled. He also indicated that he would be able to share more updates upon his return to the U.S. on the 21st.

[Image source=AP Yonhap News]

On the same day, House Speaker McCarthy also drew a line under concerns about a default related to raising the federal debt ceiling. Appearing on CNBC's Squawk Box, he said, "In the end, we believe there will be no default," and added, "We ultimately got the president to agree to negotiate." He emphasized, "The only thing I am certain of is that we now have a structure that allows us to find a way to reach a conclusion."

Speaker McCarthy particularly described President Biden's willingness to negotiate as "encouraging," a shift in tone compared to his previously negative stance before the second meeting. While acknowledging the tight deadline for negotiations, he expressed a willingness to find a solution together. Democratic House Majority Leader Hakeem Jeffries also told Squawk Box in a separate interview, "Yesterday was a very positive meeting," adding, "It was calm. The discussions were candid. I am optimistic that we can find common ground within the next one to two weeks."

[Image source=AP Yonhap News]

New York Stock Market Rises Over 1% on Hopes for Agreement... Challenges Remain Until Final Deal

The market, which had been weighed down by growing default concerns, immediately cheered. On that day, the three major New York stock indices all closed higher, buoyed by expectations of a debt ceiling increase. The Dow Jones Industrial Average rose 1.25% from the previous close. The S&P 500 and Nasdaq indices also jumped 1.19% and 1.28%, respectively. As risk appetite recovered, international oil prices also increased. At the New York Mercantile Exchange, the June delivery price of West Texas Intermediate (WTI) crude oil closed at $72.83 per barrel, up $1.97 (2.78%) from the previous session.

However, with the deadline looming and persistent differences in positions, there are concerns about a difficult path to final legislative approval. On the same day, Speaker McCarthy, while optimistic about the negotiations, reiterated that the federal debt problem, which has been the reason for opposing the debt ceiling increase, remains serious. Majority Leader Jeffries also rejected the Republican proposal to strengthen work requirements for welfare programs targeting low-income groups. Currently, both sides' aides are reportedly focusing discussions on finding common ground in areas such as recovering COVID-19 budgets, streamlining energy project approval procedures, and setting government spending caps. The Democrats are also preparing an emergency plan to immediately bring a debt ceiling increase bill to a House vote in case negotiations between President Biden and Speaker McCarthy ultimately fail.

If the debt ceiling is not raised, as Treasury Secretary Janet Yellen has warned, a default could materialize as early as June 1, bringing "catastrophic consequences" not only to the U.S. but to the global economy. As the so-called X-day, when all cash is depleted, approaches, financial market uncertainty is bound to increase. More than 140 U.S. business CEOs issued an open letter the previous day urging politicians to promptly raise the debt ceiling.

Jamie Dimon, chairman of JP Morgan Chase, known as the "Emperor of Wall Street," said on the day, "The United States should not default, and probably will not," but added, "Whatever happens, we will be prepared." JP Morgan, the largest asset manager, is already preparing for the risk of default. Earlier, Dimon revealed that JP Morgan has been holding weekly war room meetings to prepare for the possibility of default and plans to hold daily meetings starting around the 21st.

This content was produced with the assistance of AI translation services.