The U.S. House of Representatives on Wednesday passed two bills intended to support protesters in Hong Kong and send a warning to China about human rights.
The legislation, which has angered Beijing, has been sent to the White House for President Donald Trump's approval. A person familiar with the matter said Trump was expected to sign it.
"China will surely take this as an interference into its domestic affairs and is likely to think it will no longer need to make concessions on trade," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The move came as trade experts and people close to the White House said completion of a "phase one" U.S.-China trade deal could slide into next year, as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.
Trump said on Oct. 11 that the deal could take as long as five weeks, and investors had initially expected an agreement by mid-November.
Asked Wednesday about the status of the China deal, Trump told reporters in Texas: "I don't think they're stepping up to the level that I want."
Trade jitters sent the 10-year U.S. Treasuries yield down to 1.707%, near its lowest levels in three weeks and down more than 25 basis points from a Nov. 7 peak of 1.973%, a three-month high.
Similarly in the currency market the yuan hit three-week lows, trading as low as 7.0450 to the dollar in onshore trade.
The dollar slipped 0.3% against the yen to 108.31 JPY= , compared to this week's high of 109.07 touched on Monday, while safe-haven gold edged up 0.26% to $1,474.9 per ounce.
The euro was little changed at $1.1075.
Tomoo Kinoshita, chief economist at Invesco Asset Management in Tokyo, said the market is unlikely to completely give up hopes on the trade deal.
"There have always been some uncertainties in trade talks but that won't erase positive effects from signs of bottoming out in the global manufacturing sector," he said.
The minutes from the Federal Reserve's previous policy meeting published on Wednesday offered little guidance on what would cause policymakers to change their minds on the outlook after an increasingly divided Fed decided to hit pause in its easing cycle.
Oil prices also dipped, paring some of their 2% gains made on Wednesday after a better-than-expected U.S. crude inventories report and as Russia said it would continue its cooperation with OPEC to keep the market balanced.
Global benchmark Brent futures LCOc1 dropped 0.4% to $62.16. U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 0.39% at $56.79 per barrel in early Thursday trade.
(Editing by Stephen Coates and Jacqueline Wong) ((email@example.com; +81 3 4563 2768;))
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