Stronger than expected Chinese economic data has given stock markets a bounce despite continued concern about whether Washington and Beijing can clinch a trade deal in the coming weeks.

The legislation signed by Donald Trump last week backing Hong Kong’s protest movement has “stalled” the negotiations, according to US sources close to the months-long talks quoted by the website Axios on Monday.

The Chinese government was infuriated by the two new acts, which mean the US will conduct an annual review of Hong Kong’s special trading status and allow US sanctions against officials responsible for human rights violations in the territory.

The public hostility from Beijing has cooled talks on “phase one” of a deal to end the 16-month dispute between the two economic superpowers. But unnamed sources also told Axios that a timeout was needed to allow Chinese president Xi Jinping to let the anger against the legislation subside.

The next critical deadline in the talks is 15 December when the US is due to impose an additional 15% tariff on about $156bn of Chinese products. Axios cited two other sources as saying that the extent of any tariff rollback was still a “substantive” obstacle to progress, as was how to ensure China buys more US agricultural produce.

Reports from China on Monday suggested Beijing’s priority was the removal of all existing tariffs on hundreds of millions of dollars worth of Chinese goods – not just the upcoming additional levies. “The US must remove existing tariffs, not planned tariffs, as part of the deal,” the Global Times reported, citing “sources with knowledge of the talks”.

Investors have widely expected that the two sides will reach a deal before then, with the US scrapping the levies and averting a certain flare-up.

Such a move by Trump could be seen as a significant climbdown unless he extracts more wide-ranging concessions on intellectual property and access to Chinese markets for US firms.

However, financial markets remained more broadly optimistic about the prospects for the deal with the Nikkei up 1.1% in Tokyo and the ASX200 rose 0.6% in Sydney to another record high.

The mood was helped by the upbeat manufacturing surveys out of China on Monday that showed the sector expanding in the past month.

Hiroyuki Ueno, senior strategist at Sumitomo Mitsui Trust Asset Management in Tokyo, said: “It looks a bit difficult for two countries’ leaders to shake hands and sign a deal this month. What is more likely is to essentially kick the can, with China buying more US farm products while the US postpones its next tariffs.

“Markets will consider such an arrangement as a de facto deal whether they officially sign it or not.”

The stronger Chinese data pointed to a healthier global economy than has been forecast and the price of oil bounced up on the news. Brent crude futures rose 1.34% to $61.30 a barrel. The US dollar also rose.

The closely watched Caixin/Markit manufacturing purchasing managers’ index (PMI) index rose to 51.8 in November from 51.7 in the previous month, marking the fastest expansion since December 2016. Output and orders were both strong, analysts said, showing better than expected domestic demand.

The consultancy Capital Economics said in a note to clients at the weekend that it expected the US to blink first in the tariff dispute.

“China is the source of two-thirds of US imports of goods on this tariff list, which are mainly consumer products, and nearly half of global exports,” Capital said. “As a result, US importers would find it far harder to find alternative suppliers than they did in response to earlier rounds of tariffs. So while a ‘phase one’ deal has yet to materialise, at the very least a delay to the planned implementation of the tariffs on 15 December is likely.”