TALKS
FILE PHOTO: Chinese Vice Premier Liu He smiles as he talks with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer as he arrives at the office of the Trade Representative for further trade talks in Washington, U.S., May 10, 2019. (Photo: REUTERS/Clodagh Kilcoyne/File Photo)

The latest attempt to mitigate Trump's trade war against China begins Thursday but the general consensus among the U.S. business community is that no broad agreement to fully end the trade war will be reached. A partial trade deal is a possibility, however, and seems likelier.

The palpable pessimism was reflected in Wall Street's plunge on Tuesday as any hope of progress in the new trade talks were dashed by a report the Trump administration will indeed limit capital flows to China. The administration also added some of China's big startups to a blacklist on Monday.

The blue-chip Dow Jones Industrial Average fell 229.90 points, or 0.87%, at 26,248.12. The S&P 500 shed 31.94 points, or 1.09%, at 2,906.85. The NASDAQ Composite lost 88.97 points, or 1.12%, at 7,867.33.

Analysts said the declines were broad-based. All 11 major S&P 500 sectors traded lower while 28 of the 30 components of the Dow entered negative territory.

"The headlines are painting a picture of a less optimistic tone to the trade talks this week," according to John Zaller, a chief investment officer of MAI Capital Management in Ohio.

"Investors are not expecting a big deal or a small deal this week, but anything less than a tariff delay would be a pretty big disappointment for the markets."

Besides the depressing news coming out of Washington, investor sentiment was further dented by a report China is diffusing expectations ahead of the high-level Oct. 10 talks. The Chinese delegation might also depart a day earlier than planned.

Chinese state media said Chinese negotiators aren't optimistic about securing a broad agreement that will finally end the 15 month-old trade war ignited by Trump in pursuit of neo-mercantilist and isolationist trade policies.

Investors now look to a partial trade deal, which seems the more likely, to buoy market sentiment for the rest of the week. China seems intent on clinching a partial deal.

Sources cited by U.S. media said Vice Premier Liu He will make "real offers" and his visit won't by an empty one.

"The Chinese are ready to de-escalate," said a source quoted by Bloomberg.

The publication also said China is willing to talk about a partial agreement as long as no more tariffs are imposed by president Donald Trump. China has also hinted it wants Trump to abandon the planned tariffs to be implemented this month and in December as a pre-condition for any partial agreement.

To sweeten the deal, China will offer non-core concessions like more purchases of agricultural products from the U.S. It won't back down from its opposition to major Trump demands such as stricter protections for foreign intellectual property rights and a fundamental re-design of China's command economy.