WASHINGTON - Asian markets sank on Wednesday on worries that hardline Republicans could vote down a crucial bill to hike the US borrowing limit and risk a catastrophic default that could hammer an already fragile global economy.
Worries that the Federal Reserve might increase interest rates next month, along with further signs the Chinese recovery was fading, added to the downbeat mood on trading floors.
The buoyant mood that started the week -- after President Joe Biden and House Speaker finalised a debt deal -- was giving way to a fear that the far-right Freedom Caucus could do the unthinkable and torpedo it.
Members on both sides of the political spectrum have raised concerns about the agreement, with Republicans saying it does not have enough spending cuts and the left wing of the Democratic Party unhappy Biden agreed to any limits at all.
While McCarthy has described the deal as "transformational" and expressed confidence the bill will pass, leading Freedom Caucus member Chip Roy called it a "turd sandwich".
"Not one Republican should vote for this deal. It is a bad deal. No one sent us here to borrow an additional $4 trillion to get absolutely nothing in return," Roy said at a Freedom Caucus news conference.
He later warned McCarthy would face a "reckoning". That came as another GOP Representative, Dan Bishop, called party members to vote McCarthy out as speaker.
Still, House Democratic leader Hakeem Jeffries remained confident, telling Bloomberg Television: "We will be able to get this bill over the finish line tomorrow."
But with the House vote due later Wednesday, nervous investors were shifting out of risk assets, sending Asian markets into the red.
Hong Kong led losses, dropping more than two percent. Shanghai was also well down after data showed China's manufacturing activity contracted even further last month as leaders struggle to kickstart the world's number-two economy.
There were also big losses in Tokyo, Sydney, Seoul, Singapore, Taipei, Wellington, Manila and Jakarta.