Republican House Speaker John Boehner and Texas Senator Ted Cruz dramatically caved in to pressure today paving the way for a Democrat-led bill to pass before a midnight deadline to ensure the country doesn't crash through its debt ceiling and cause global chaos.
The bill still needs to be navigated through the House and Senate, but observers on Capitol Hill expect it to sail through in a crushing defeat for Republicans on the party's right wing.
Boehner and his House caucus have walked away humiliated after a month of brinkmanship in which the Republicans were accused by President Obama of holding the White House ransom over Obamacare and their desired spending cuts.
The speaker made his capitulation official after a closed-door meeting with his caucus Wednesday afternoon, saying he would 'absolutely' navigate the bill quickly through the House, even if he has to rely on Democrats to pass it.
Republicans' fight against the Obamacare law 'will continue,' he said. 'But blocking the bipartisan agreement reached today by members of the Senate will not be a tactic for us.'
News of a deal saw the Dow Jones Industrial Average soaring to a finish 205.82 points ahead, a 1.36 per cent gain.
U.S. Treasury bond yields, which rose through the morning, headed downward again after Senate Democratic Leader Harry Reid and his Republican counterpart Mitch McConnell announced their compromise, signaling at least a temporary relaxing of global market fears.With more blood to squeeze out of American tax payers, the global markets responded positively.
Stock markets staged a rally today after US politicians struck an eleventh hour deal to avoid a catastrophic debt default which had threatened the global economy.
The FTSE 100 Index had earlier plunged into the red as the prospect of the world's largest economy defaulting on its debt edged nearer, but by the close of the session updates from Washington had lifted it 22.5 points to 6571.6.
In New York, the Dow Jones Industrial Average surged 200 points ahead, a rise of more than 1%. Germany's Dax was also up, although France's Cac 40 failed to climb out of the red by the end of the session.