Argentine markets stabilize after political uncertainty smashes bonds, peso By Reuters


© Reuters. FILE PHOTO: Argentine one hundred peso bills sit underneath United States one hundred dollar bill in this picture illustration

By Hugh Bronstein and Jorge Otaola BUENOS AIRES (Reuters) – Argentina’s peso strengthened on Friday as bargain hunters stepped in to push asset prices higher following weeks of tumult touched off by the landslide win of populist-leaning presidential candidate Alberto Fernandez in the Aug. 11 primary. The local currency gained 0.2% to 55.92 per U.S. dollar, over the counter bonds were up an average 2% , risk spreads tightened and the Merval stock index () rose 3.5%. The peso had strengthened more than 6% through Thursday, but remained 19.2% weaker since last month’s primary vote showed that Fernandez is likely to be elected Argentina’s next leader. “Current pricing already includes a fair amount of the risks involved,” said Alberto Bernal, chief emerging markets strategist at XP Investments in New York. Business-friendly incumbent Mauricio Macri is trailing in his bid for a second term in the Oct. 27 general election. Fernandez laid out his populist credentials during a visit to Madrid on Thursday, saying local Argentine interests would trump those of creditors and energy investors. As distressed debt specialists rushed to buy discounted Argentine paper, Fernandez’s economic adviser, Guillermo Nielsen, has held conference calls with the country’s foreign creditors over the past week, investors said. Nielsen was the country’s chief debt negotiator following a default in 2002. Argentina’s over-the-counter sovereign bonds fell an average 39.4% in August before bargain hunters stepped in this week, pushing prices 7.5% higher on Wednesday and Thursday alone. Macri, who came to power in 2015 as a free-market champion and critic of interventionist policy, was forced to roll out plans to delay payments on around $100 billion of debt amid default fears and impose currency controls. Those have stabilized markets, but the economic outlook has dimmed. Economists polled by the central bank raised their inflation forecast for the year to 55% and cut their outlook for the economy, expecting it to shrink 2.5%.

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