Sharp drop in Argentine bond and stock prices on Wall Street

Renewed expectations for progress on the Basic Law after the government finally received Senate approval last week have not been enough to mitigate the impact of a poor financial climate internationally, compounded by growing concerns over domestic political noise. .

Thus, the day, which was in the middle of a mixed trend wheel, ended up turning red for bonds and stocks listed abroad. Dollar securities recorded an average decline of 3%, with the most representative securities falling by 2.7% by the end of the day. Consequently, country risk continued to rise, rising nearly 5% to 1,414 basis points.

A negative trend also prevailed on the stock market. The Merval index fell 3.4% in dollar terms, with virtually none of the ADRs – shares of Argentine companies listed on Wall Street – escaping the decline. There are only two exceptions: Despegar and Ternium, who managed to remain almost neutral.

The rest closed in the red up to 7.5%, such as IRSA or Cresud and Central Puerto, which fell more than 4% at the end of the wheel, as did other energy companies such as Pampa or Edenor. Less punished, but equally negative, banking securities ended the day with losses of 1 to 2.5 percent.

The exchange front was characterized by the same dynamics, strong pressure on quotes and low volume in the official segment. With transactions totaling only US$236 million, the Central Bank purchased only US$59 million. As for the financial versions of the currency, quotes marked a 3.9% gain for cash settlement, which closed at $1,300, while the exchange dollar or MEP recorded a nominal record of $1,268, equivalent to a 4.5% gain. compared to Friday.

“After the conclusion received in the Senate, the market’s attention will be focused on the vote. If approved, even if it returns to the House of Representatives, it would be good news for bonds and stocks, which have lost momentum in recent weeks after a strong start to the year,” said economist Roberto Gueretto of Fundcorp. This loss of momentum, which has sometimes allowed Argentine assets to escape the negative climate at the global level, was felt in today’s round.

“While parliamentary approval marks an important milestone as a sign of political support, given that this will be the government’s first law, economic agents will also await its final content, given that it is important to be able to ensure the sustainability of the budget surplus. “It becomes the central anchor of governance,” said economist Gustavo Behr.

The market’s decline also comes amid growing fears of political instability from the government, which is going through a political crisis marked by cabinet changes as well as allegations of corruption in its most sensitive area: the Ministry of Human Capital, responsible for social containment policies, amid a strong fiscal adjustment. At the same time, some “early warnings” are beginning to appear regarding the government’s main achievement to date—lowering inflation.

Most private analysts agree that the May index will be below 5%, although some voices have begun to warn of a possible “plateau” on the decline. For example, a survey of retail prices by consulting firm C&T showed monthly growth of 4.6% was expected in May, the lowest since February 2022, with a 12-month change trending downward for the first time since December. 2022. 2021 to a still high level of 283.5%.

“With monthly inflation below 6% per month, the government has to worry about it rising again in the coming months. A definitive attack on inflation, with a simultaneous vigorous reactivation of the economy, can only be applied on the basis of unification and monetary liberalization, which is achieved without a surge in devaluation,” warned former Economy Minister Domingo Cavallo, for example, in one of the statements that had the biggest impact over the weekend.