TOKYO (AP) — Asian shares rose Thursday, tracking a rally on Wall Street after signs of progress on resolving the standoff in Congress over the debt ceiling.

Japan’s benchmark Nikkei 225 gained 0.5% to finish at 27,678.21. Australia’s S&P/ASX 200 added 0.7% to 7,256.70. South Korea’s Kospi jumped 1.8% to 2,959.46. Hong Kong’s Hang Seng surged 2.9% to 24,659.84. Trading was closed in Shanghai for a Chinese national holiday.

Stephen Schwartz, a senior director at Fitch, said he believes the regional economy will start to recover with the growing vaccination efforts in Asia, which mean restrictions to curb the spread of the coronavirus will get lifted.

But southern and southeastern Asia, where vaccination rollouts have lagged, remain vulnerable to COVID-19 “pandemic-related setbacks.” Recent problems in China’s property sector are another risk, he added.

“Slower growth in China, together with the tapering we expect by the U.S. Fed, could have broader negative repercussions, especially for the region’s emerging and frontier markets,” he said.

Japan’s economic prospects also remain murky as new Prime Minister Fumio Kishida gives his first policy speech later this week. Although he has promised to boost incomes, he has not outlined specifics and is not widely perceived as a proponent of the regulatory and structural changes analysts have long said Japan sorely needs. Some skeptics worry that any new spending will merely push the country into deeper debt.

Kishida has also spooked investors by voicing support for a capital gains tax.

In the U.S., investors are hoping Congress may manage to temporarily extend the federal government’s debt ceiling and buy lawmakers time to reach a more permanent resolution. The market recovered from a morning loss shortly after Senate Republican leader Mitch McConnell offered Democrats an emergency short-term extension to the federal debt ceiling into December.

The S&P 500 rose 0.4%, to 4,363.55. The Dow Jones Industrial Average rose 0.3% to 34,416.99. The Nasdaq gained 0.5%, to 14,501.91. The tech-heavy index had been down 1.2% before the afternoon rally.

Small-company stocks, a gauge of confidence in economic growth, fell: The Russell 2000 index gave up 0.6% to 2,215.

If the nation’s debt ceiling, which caps the amount of money the federal government can borrow, isn’t raised by Oct. 18, the country “would likely face a financial crisis and economic recession,” Treasury Secretary Janet Yellen told Congress last week.

During a meeting Wednesday with bank executives, President Biden stressed the importance of Congress raising the debt limit.

“We haven’t failed to do that since our inception as a country. We need to act. These leaders know the need to act.”

The Senate went into recess late Wednesday so lawmakers could discuss McConnell’s proposal, delaying a procedural vote on a House-passed bill to suspend the debt cap.

The latest bout of market volatility comes as investors question the economy’s path forward, amid rising inflation and the ongoing impact from the virus pandemic.

High on Wall Street’s list of concerns is the Federal Reserve’s timetable for raising interest rates. The Fed’s policymaking committee recently signaled the central bank could start raising rates late next year. Analysts have said that the Fed could act sooner than expected if high inflation persists.

Investors will get a closer look at how companies fared in the third quarter when quarterly financial results are released over the coming weeks. Wall Street is expecting solid profit growth of 27% for S&P 500 companies, but will also be listening for commentary on how supply chain problems and higher costs are crimping operations.

On Friday, the Labor Department will release its anticipated employment report for September. The labor market has been slow to fully recover from the pandemic and the summer surge in COVID-19 cases further impeded its progress.

In energy trading, benchmark U.S. crude slipped 49 cents to $76.94 a barrel in electronic trading on the New York Mercantile Exchange. It gave up $1.50 to $77.43 per barrel on Wednesday. Brent crude, the international standard, fell 2 cents to $81.06 a barrel.

In currency trading, the U.S. dollar inched up to $111.39 Japanese yen from 111.41 yen. The euro rose to $1.1570 from $1.1557.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.