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World shares retreat after Trump approves Hong Kong bil

Stock markets fell Thursday after President Donald Trump signed a bill supporting human rights in Hong Kong, potentially increasing tensions as the U.S. and China talk about ending their trade war. Trading volumes were muted, however, with the U.S. closed for Thanksgiving.

China reacted with indignation to the legislation, which Congress passed with overwhelming support. Beijing summoned U.S. Ambassador Terry Branstad for a dressing down and issued multiple statements threatening unspecified countermeasures.

In Hong Kong, where sometimes violent protests have dragged on for nearly six months, the Hang Seng index lost 0.2% to 26,893.73. The Shanghai Composite index lost 0.5% to 2,889.69.

In Europe, Britain’s FTSE 100 declined 0.4% to 7,402 and the CAC 40 in Paris gave up 0.3% to 5,908. Germany’s DAX declined 0.4% to 13,235.

U.S. futures were modestly lower, with the contracts for both the Dow Jones Industrial Average and the S&P 500 losing 0.3% and 0.2%. U.S. markets will remain closed Thursday for Thanksgiving and open for a half day on Friday.

Trump’s move did not come as a surprise, given the pressure from both Democrat and Republican lawmakers to support the legislation. But it’s unclear if the human rights bill, which Beijing views as “meddling” in China’s internal affairs, might derail recent progress in trade talks with Washington.

“We urge the U.S. to not continue going down the wrong path, or China will take countermeasures, and the U.S. must bear all consequences,” the Chinese Foreign Ministry said in a statement.

Markets appeared to be taking the developments in stride, said Stephen Innes of AxiTrader, “on the assumption that the U.S. legislation is unlikely to torpedo phase one. But of course, it does provide a stark reminder that on one level or another, U.S.-China frictions are always going to be a thorn in the markets’ side.”

The key question in China-U.S. trade negotiations is whether they will be able to reach a deal before Dec. 15, when new tariffs are set to kick in on many Chinese-made items, including smartphones and laptops.

Pressure is building on both sides to complete a limited “phase one” deal before the deadline, though the Trump administration could end up postponing it, as it did in October, to allow more time for talks.

Japan’s Nikkei 225 index lost 0.1% to 23,409.14 while the Kospi in Seoul shed 0.4% to 2,118.60. Australia’s S&P ASX 200 gained 0.2% to 6,864.00. India‘s Sensex added 0.1% to 41,059.51.

On Wednesday, investors capped a day of light trading on Wall Street by serving up another set of stock market record highs. The S&P 500, Dow and Nasdaq closed at all-time highs for the third straight day.

Benchmark crude oil lost 22 cents to $57.89 per barrel in electronic trading on the New York Mercantile Exchange. It fell 30 cents on Wednesday. Brent crude oil, the international standard, gave up 12 cents to $62.89 per barrel.