US stocks (check Teck) closed marginally lower, dragged down by European markets and D. Trump calling off the Singapore Summit with the North Korean leader. Earlier in the day, North Korea had said it was ready for a "nuclear-to-nuclear showdown" if the U.S. did not change its approach to disarmament talks with an official slamming Vice President Mike Pence for his "ignorant and stupid remarks" after he suggested "this will only end like the Libya model ended if Kim Jong Un doesn’t make a deal". D. Trump fainted an intuition during a press conference on Wednesday that the attitude of Kim had changed after a second visit of North Korean leader to the “master poker player” China’s President Xi Jinping earlier this month. This was perhaps a good example of failure of the ‘art of the deal’ currently applied as a template for the handling of all international economic and diplomatic affairs by the US President. We can think of at least three reasons why the North Korean leader may have decided not to play ball yesterday. First, accepting an unconditional surrender of its nuclear capabilities in exchange of surviving or becoming a US political puppet, should not have been considered as a starting point for negotiation at the first place. At least not the way it was presented by M. Pence. Second, the only very thinly veiled suggestion that the US would expect plenty of ancillary economic rewards for saving the North Korean regime, ostensibly and as a preamble to the summit, may have been considered as a continuation of the blackmail policy erected as US policy aimed at attracting the economic benefits of geopolitical tensions (real, putative or simply blown out of proportion). Thirdly, offering D. Trump a summit in June with, as a string attached, a possible nomination to the Nobel peace Prize, would be great timing ahead of the US midterm elections and perhaps a reason why D. Trump himself rushed an early date for the summit, except that it may have looked as a too generous offer from Kim considering the way the US President is handling international affairs. So, this summit will (likely) not happen in June and that was a 60minutes or so cause of concern for US equity markets yesterday which also had to cope with oil prices falling for a third day and weaker European stocks (and Asian markets). Those were dealt a blow on Thursday by the Trump administration saying it considers a plan to impose tariffs of as much as 25% on imported vehicles, citing “national security” concerns. This opened yet another front (and confrontational approach) in the Trump administration’s trade battles, affecting both allies and rivals. China's Commerce Ministry said earlier that it had not pledged to cut the country's trade surplus with the U.S. by a certain figure, further fueling uncertainty over trade talks. A relapse in the Turkish lira (which coincided with Turkish President Erdogan telling Turks not to exchange their dollars for liras) which had erased the overnight post 3% rate hike rally, was also seen pressuring stocks and risky assets yesterday. However, and after worrying for the whole day, US stocks recovered one more time to close mostly unchanged. The dollar rally lost some steam, falling from five months high yesterday, and saw $ bears quickly making a comeback. We are not so sure this is the end of the dollar squeeze as another Fed tightening is coming soon and as the ECB remains still largely trapped by the Italian situation which prevents it from talking about joining the Fed’s normalization efforts. That being said EM currencies should not always be bulked together and there are better stories than others. US bonds were very strong as well, benefiting from a further squeeze in German bunds on the heels of continued pressure on the BTP/Bund yield spread. Our Confidometer suggests continued risk appetite remained buoyant. Oil suffered a bout of profit taking, on higher inventories and the prospect of OPEC raising output. Gold rallied +0.6%, supported by nervous equity markets and TYR renewed weakness. French President Macron visited Russia yesterday, reaffirming Europe’s support for Iran’s nuclear deal. Russia's Finance Minister A. Siluanov said at the St. Petersburg International Economic Forum that settlements in US currency could be dropped by Russia in favor of the euro if the EU takes a stand against the latest US sanctions on Moscow.

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