Authored by Garfield Reynolds, Bloomberg markets live commentator

For markets, trade talks dominate everything else this week, so here’s a simplified game plan for how it might play out.

China’s cooling economy, soggy earnings from the likes of Caterpillar, Nvidia, Harley Davidson, plus a slew of weak export data prints have helped create a consensus that what the markets need more than anything else is trade peace.

Such a view may be naïve. China deleveraging, Brexit, Italy, the U.S. shutdown have all done plenty of harm too. Plus, repairing the already-seen trade war damage will be a gradual and difficult process.

But that’s mostly beside the point -- the talks are highly likely to set off extreme, sustained market moves because sentiment has become so sensitive to the trade war. Considering that, the potential scenarios could be roughly delineated as follows:

Trade talks break down and the trade war escalates No concrete steps, but positive sounds and more talks planned Agreement on tariffs announced, but IP/tech issues go onto a separate track for longer-term talks Agreement announced on both tariffs and IP

The first scenario will be the easiest for traders to react to. JPY would surge and Treasury yields would drop. EM FX and AUD would slump, while global equity markets would be a sea of red.

The second and third may prove sufficient to see January’s risk-asset rebound turn into a sustained rally. Outcome 2, in particular, would represent the sort of can-kicking that markets often welcomed during the euro and Brexit crises.

The fourth should be the purest risk-on scenario in theory, but the devil could be in the details. A Trump-Kim summit redux - declare peace now and worry about the fine print later - could set off a similar fade-the-win moment for risk assets, after the initial euphoria.

Going into the talks, there seems to be too much complacency that Trump and Xi will decide they have to make a deal to end the damage already inflicted. Neither of them has a strong-enough track record of subordinating political aims to economic needs to make that an ironclad proposition.

The bar for success may not be too high this week, but there may be a stumble when the U.S. and China try to hurdle it in tandem.