RUB ended yesterday’s session on a softer footing. In the morning, the FX market opened under pressure right away on the back of slippage in crude prices (Urals ended 0.4% down) and geopolitical tensions. Late in the evening, news arrived that S&P had downgraded Russia one notch from BBB- to BB+ with a Negative Outlook. In light of this, USDRUB surged to close at 68.50: i.e. for the full session, RUB weakened near 6.4% vs. USD. Meanwhile, the EM FX index closed barely changed, but with mixed performances: ZAR ended 0.4% in the red, while MXN firmed 0.5%. The reaction to S&P’s action was also negative for other assets, with futures on the RTS down near 4.0% and the Russian sovereign spread widening some 30bp. S&P’s rating revision had been pre-announced, so to a certain extent, it had already been priced in. In particular, the Russian sovereign spread has lately been close to its peers with BB-/B+ ratings, leading us to the conclusion that the initial reaction was excessive – especially given the subdued liquidity in the evening market.