EMERGING MARKETS-LatAm currencies drop as Trump's Greenland gambit rattles investors

By Ragini Mathur, Twesha Dikshit and Johann M Cherian

Jan 20 (Reuters) - Most Latin American currencies slipped on Tuesday as U.S. President Donald Trump's threats to reignite a trade war with Europe over Greenland sent ripples through global markets.

Trump doubled down on his ambitions for the Arctic island, saying there was "no going back" on his goal to control Greenland while refusing to rule out military force.

The U.S. President warned on Saturday he would impose an additional 10% levy from February 1 on goods imported from eight European nations, rising to 25% on June 1 if there was no deal on Greenland.

European Union leaders were preparing to respond, with an emergency summit scheduled for Thursday in Brussels to discuss retaliatory measures.

"While (geopolitics) adds a new wrinkle to the tariff issue, we believe cooler heads will prevail and that these tariff threats are being used as a negotiating tactic for control of Greenland," said Paul Stanley, chief investment officer at Granite Bay Wealth Management.

The escalating tensions have revived the "Sell America" trade that first emerged after Trump's "Liberation Day" levies announced last April as U.S. equities, Treasuries and the dollar were all in declines.

In LatAm, the risk-off mood was reflected in currencies, with MSCI's gauge .MILA00000CUS down 0.2% and Colombia's peso COP= and Brazil's real BRL= down 0.4% and 0.1%, respectively.

Mexico's peso MXN= and Peru's sol PEN= were flat, while Chile's peso CLP= bucked the trend with a 0.4% rise.

The turmoil extended into fixed income markets, where U.S. long-dated Treasuries sold off sharply and the yield curve steepened. Investors were digesting both Trump's tariff threats and upheaval in the Japanese bond market.

With U.S. markets closed on Monday for a holiday, Tuesday marked the first opportunity for traders to react to the weekend developments.

Emerging market bonds also took a beating. Ukraine's sovereign bonds posted their worst day of the year so far, while South African and Indonesian sovereign debt saw their steepest declines since July.

EQUITIES BROADLY TRACK COMMODITY STRENGTH

Bourses in the region were volatile for much of the session. MSCI's index tracking LatAm stocks .MILA00000PUS shrugged off earlier declines and edged up 0.6%.

Gains were particularly in commodity-linked stocks as prices of precious metals and crude oil traded higher.

Mexican gold and silver miner Industrias Penoles PEOLES.MX gained 2.4%, while Brazilian mining giant Vale VALE3.SA added 1.5%.

Energy companies in the region such as Colombia's Ecopetrol ECO.CN and Argentina's YPF YPFDm.BA added over 2% each. A media report said Ecopetrol is taking preliminary steps to resume importing natural gas from Venezuela.

Key Latin American stock indexes and currencies at 1914 GMT: