EM currencies stumbled again on Thursday with the ruble dropping 5% in 2 days as the US introduced new sanctions against Russia. Some of the threatened sanctions may actually not materialize but resuming the logic of sanctions (which have become along with tariffs the sole expression of US foreign policy) triggered the Kremlin to respond that “Such measures are absolutely unfriendly and can hardly be associated with the constructive -- difficult but constructive -- atmosphere at the last meeting of the two presidents”. The bottom line of this apparent inconsistency is that the friendlier and more constructive D. Trump tries to be with Russia and V. Putin, the more sanctions he needs to impose against Russia for internal political reasons to make people forgive how close D. Trump feels with V. Putin and how badly the Russian army had the last word in Syria. Or else these sanctions are a response to Russia for having done the only sensible thing considering the bellicose sanction-based US attitude towards Russia by selling out its stock of US Treasury reserves… On Wednesday, Bloomberg featured the picture of a sinking ship to illustrate the ruble selloff and yesterday it was a Turkey with a fork in it to illustrate the lira’s decline. That was meant to be funny and in line with the editorial line but some useful truths and a proper piece of journalistic work presenting the “facts” also came from RT which Western media commonly portray as a vector of “propaganda”. Earlier this month, Moody’s had issued a positive note on the Russian credit which was not widely commented which comforted us to believe that the fundamental case for selling RUB is not compelling as the country benefits from strong fundamentals (positive trade balance, no or very little debt), a high yield and a positive assessment from rating agencies except for whatever sanctions the US has or might have in store which Russia has grown and will continue to grow accustomed to. As a result, this latest US caused EM currency rout may contribute to is to dent global risk appetite as the world continues to oscillate, trying not to vacillate between US tariffs and US sanctions... The S&P 500 shed the day’s gains in the last 15 minutes of trading as sentiment succumbed to rising geopolitical concerns and the latest deterioration on the trade war front following China’s retaliation to the last salvo of US tariffs. The Nasdaq also closed unchanged with some of the big names continuing to look as if US tech stocks are the only game (hedge?!) in town. Politically, the Ohio primaries suggested on Wednesday that the battle to keep the House is far from a sure bet for D. Trump at the next mid-term elections. Two days after tweeting his intention to take Tesla private (claiming a secured funding), E. Musk hasn’t disclosed any sources of financing and no one stepped forward publicly to pick up the tab. The stock fell 5% yesterday. 10y Treasury yield fell 4bps to 2.92% after producer prices stagnated last month and the dollar rallied while the Euro closed broadly lower. EURCHF dropped 70 ticks and EURGBP also shed some of its recent Brexit related gains. Gold in EUR gained slightly while gold in dollars was mostly unchanged. Selling pressure seems to have abated slightly with speculative positioning against gold at extremes which if anything, should be a supportive factor when the tide finally turns. 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