Asian markets retreat after Trump signs Hong Kong bill

Asian markets mostly retreated after US President Donald Trump signed a bill supporting Hong Kong protesters, a move that could potentially infuriate Beijing and complicate the US-China trade talks.

Hong Kong’s Hang Seng Index dropped 0.2% on Thursday. South Korea’s Kospi index slipped nearly 0.1%.

China’s Shanghai Composite opened lower but was last trading up 0.1%. Japan’s Nikkei 225 briefly lost 0.3%. It was last trading flat.

Trump signed the Hong Kong Human Rights and Democracy Act into law Wednesday in the United States. The new law would require the United States to annually confirm Hong Kong’s special freedoms are being maintained by Beijing. Failure to do so could result in Washington withdrawing the city’s special status, a potentially massive blow to Hong Kong’s economy and potentially its status as a financial hub.

Trump’s move could heighten tensions between Beijing and Washington, as the two sides had been working toward reaching a trade deal.

China’s Ministry of Foreign Affairs blasted the law on Thursday, saying that “such an action has seriously interfered in Hong Kong’s affairs and China’s domestic politics.”

“Such plainly bullying behavior is firmly opposed by the Chinese government and Chinese people,” the agency said.

Markets had reacted positively this week amid hopes for a US-China trade deal. Major US indexes posted fresh record highs on Wednesday. European stocks are also at multi-year highs.