Temper Expectations of Lasting Solution to Trade War, Blackrock Analyst Says

(Bloomberg) -- Investors parsing each breaking headline as U.S.-China trade talks get under way may need to temper their expectations, given the unlikelihood the two will come to a lasting solution to the trade war anytime soon, according to BlackRock Investment Institute strategist Ben Powell.

The tensions between the U.S. and China are structural and likely to persist through at least 2020, so if the result of the latest round of talks is more talks, that’s a pretty positive outcome, said the Asia-Pacific chief investment strategist at the BlackRock Investment Institute.

“The chance of a big deal which sees the tensions go away, we don’t think that is at all likely or even plausible,” Powell said in an Oct. 8 interview in Hong Kong. “What I’m looking for is do they agree to more talks? In some ways that’s unsatisfying because we all want a solution. A clear outcome either positive or negative is somehow simpler.”

A key sign of progress would be if President Donald Trump commits to attend an Asia-Pacific Economic Cooperation summit scheduled in November, which he declined to attend a year ago, Powell said.

Thursday morning in Asia has been a busy one for market watchers with a flurry of headlines sending equity markets swinging between gains and losses, including contrasting reports over the length of the negotiations. Bloomberg also reported the White House is looking at rolling out a previously agreed currency pact with China as part of an early harvest deal that could also see a tariff increase next week suspended.

Futures on the S&P 500 Index were down 0.2% as of 6:30 a.m. in London after dropping as much as 1.3% earlier. The underlying gauge had risen Wednesday.

To contact the reporter on this story: Eric Lam in Hong Kong at elam87@bloomberg.net

To contact the editor responsible for this story: Christopher Anstey at canstey@bloomberg.net

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