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European shares retreat as Hong Kong bill spurs trade tensions again

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By Reuters
European shares retreat as Hong Kong bill spurs trade tensions again
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 25, 2019. REUTERS/Staff/File Photo   -   Copyright  STAFF(Reuters)

(Reuters) – European shares pulled back from near-record highs on Thursday, as U.S. President Donald Trump signed into law a bill backing protesters in Hong Kong, sparking doubts about the resolution to a prolonged tariff war between Washington and Beijing.

The law, which warns of sanctions against human rights violations in Asia’s financial hub amid pro-democracy protests, drew a sharp rebuke from China for what it views as U.S. interference in an internal matter.

The diplomatic standoff threatens to derail negotiations on a trade truce between the world’s top two economies. Investors had turned optimistic that at least a partial trade deal would be signed by the end of the year.

Shares of trade-sensitive auto parts makers <.SXAP> and tech firms <.SX8P> led declines on the pan-European STOXX 600 index. The benchmark index <.STOXX> was down 0.3% by 0806 GMT.

In a bright spot, Virgin Money UK Plc <VMUK.L> jumped 7.3% to the top of the STOXX 600 as traders reacted positively to provisions for the PPI mis-selling scandal which were within its previous expectations.

Focus now shifts to a raft of economic indicators, including euro zone consumer confidence data and preliminary November inflation figures from Germany, due later in the day.

(Reporting by Sagarika Jaisinghani in Bengaluru; editing by Uttaresh.V)