(Bloomberg) -- Stocks in Asia looked set for a cautious start after a report that Washington and Beijing will be unable to agree on a trade deal this year dragged U.S. equities and Treasury yields lower.

Futures on share indexes in Hong Kong and Australia slipped, with Japanese contracts flat. The S&P 500 Index fell 0.4% after Reuters said that a pact may be delayed, though the index pared losses following a report that progress is being made. The developments came after China threatened to retaliate for the Senate’s passage of a bill that sought to support Hong Kong’s autonomy from Beijing. The House votes on the measure later Wednesday. Ten year Treasury yields slid to 1.74%.

Crucial to the U.S.-China trade discussions is the deteriorating situation in Hong Kong. China has said the Senate’s bill supporting the protesters was a “gross” interference in Hong Kong affairs.

“What was once a gray swan -- the Hong Kong protests and the situation -- has now come to the forefront and it’s setting the tone for markets’ direction in the near term,” David Mazza, managing director at Direxion, told Bloomberg TV. “We’re on a delay of the delayed smaller phase one trade deal to begin with and now we see this bubbling up. It’s another kink in the chain.”

Elsewhere, oil jumped as American crude stockpiles rose less than expected and inventories at a key storage hub shrank by the most since August.

Here are some key events coming up this week:

  • U.S. economic indicators due for release include initial jobless claims on Thursday.
  • Bank Indonesia will probably hold policy Thursday after four consecutive cuts, according to most analysts surveyed. A minority expect a 25-basis point trim.

These are the main moves in markets:

Stocks

  • The S&P 500 Index fell 0.4% on Wednesday.
  • Futures on Japan’s Nikkei 225 were flat.
  • Hang Seng Index futures earlier dropped 0.5%.
  • Futures on Australia’s S&P/ASX 200 Index slid 0.1%.

Currencies

  • The yen was at 108.62 per dollar.
  • The offshore yuan slid 0.2% to 7.0393 per dollar.
  • The Bloomberg Dollar Spot Index gained 0.2%.
  • The euro bought $1.1072.

Bonds

  • The yield on 10-year Treasuries sank four basis points to 1.74%.

Commodities

  • West Texas Intermediate crude increased 3.4% to $57.11 a barrel.
  • Gold was little changed at $1,471.64 an ounce.

--With assistance from Sarah Ponczek, Claire Ballentine and Kyoungwha Kim.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Andreea Papuc

©2019 Bloomberg L.P.