August 13, 2019 / 3:16 PM / 7 days ago

EMERGING MARKETS-Argentina's peso extends slide, stocks rebound on China relief

    By Sruthi Shankar
    Aug 13 (Reuters) - Argentina's peso dropped again on Tuesday
after a shocking defeat for business friendly President Mauricio
Macri in Sunday's primary election raised fears of populist
policies, although Latin American stock markets rebounded after
the United States delayed tariffs on certain Chinese goods. 
    The peso fell another 4% after a near 16% plunge on
Monday. The currency had fallen 30% to record low of 61.995 per
dollar in the previous session, sending shockwaves across global
financial markets.
    Opposition candidate Alberto Fernandez, who has former
President Cristina Fernandez as his running mate, pulled off a
stunning upset in the primary with a wider-than-expected
15-point lead over incumbent president Macri.
    "The news ... raised the specter of the populist opposition
seeking to renegotiate/default on the IMF loans coming to
maturity," Jefferies analysts wrote in a note.
    "Yesterday's currency slump will only cause inflation to
remain stubbornly high thereby keeping monetary policy tight and
in turn causing further public disillusionment with the current
administration."
    The cost of insuring against an Argentine sovereign default
jumped again on Tuesday. Data provider IHS Markit showed
five-year credit default swaps (CDS) marked at 2,116 basis
points, up from what was already a five-year high the previous
day.
    However, the Merval stock index rose more than 10%
after closing down 31% on Monday. Equities and other risk assets
across the globe took relief from news that the Trump
administration will delay 10% tariffs on certain Chinese
products, including laptops and cell phones, that had been
scheduled to start next month.
    Investors have been edge as a recent escalation in the
U.S.-China trade dispute, including the weakening of the yuan
past the 7-per-dollar mark, raised fears of recession.
    The Brazilian real reversed early losses to trade up
0.7%. The currency had weakened past the 4-per-dollar level on
Monday for the first time since late May. 
    The Bovespa index rose more than 1%, mirroring gains
on Wall Street.
    Latin America's largest independent investment bank, Banco
BTG Pactual SA, jumped 5% after reporting a 50.2%
increase in second-quarter recurring profit.
    Shares of Brazil's state-controlled power company Eletrobras
, however, fell 0.7%, despite its second-quarter net
income soaring 305% from a year ago.

    Latin American stock indexes and currencies at 1453 GMT:
    
   Stock indexes           Latest    Daily %
                                     change
 MSCI Emerging Markets       972.71    -0.18
                                     
 MSCI LatAm                 2711.39     2.17
                                     
 Brazil Bovespa           103597.48     1.65
                                     
 Mexico IPC                39842.99    -0.02
                                     
 Chile IPSA                 4865.26     0.78
                                     
 Argentina MerVal          30744.21    11.67
                                     
 Colombia IGBC             12634.72     1.48
                                     
                                            
      Currencies           Latest    Daily %
                                     change
 Brazil real                 3.9520     0.78
                                     
 Mexico peso                19.4619     0.74
                                     
 Chile peso                   706.4     1.08
                                     
 Colombia peso              3381.63     1.27
                                     
 Peru sol                     3.374     0.21
                                     
 Argentina peso             55.5000    -3.60
 (interbank)                         
                                     
 

 (Reporting by Sruthi Shankar in Bengaluru)
  
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