BUENOS AIRES (Dow Jones)–Argentine stocks took a hit Monday as the selloff in Europe and the U.S. spooked local investors. Argentina’s Merval Index of leading shares sagged 2.8% to 2,485.41 points in thin trade of 32 million pesos ($7.5 million.)
Stocks in the U.S. and Europe tumbled Monday after Fitch Ratings predicted a significant economic downturn in Europe over the short term and said that the deal that emerged from last week’s E.U. sovereign-debt summit does little to resolve that continent’s debt crisis.
The U.S. selloff was also fanned by a profit warning from blue-chip bellwether Intel.
Leading the losses among the Merval components was the locally-traded shares of Brazilian oil company Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, which sank 6% to ARS60.25. Also taking a pounding was aluminum maker Aluar Aluminio Argentino(AAARF, ALUA.BA), which fell 5.7% to ARS3.16.
Bonds posted mixed results, but the heaviest-traded government debt posted solid gains.
The peso-denominated 2014 bonar badlar bond rose 0.2% in price terms to ARS102.75, bringing the yield to 23.8%. The peso-denominated 2035 GDP warrant shot up 3% to ARS10.24 ahead of the upcoming annual payout on the warrant and expectations of continued solid economic growth.
The government is set to pay out almost $2.5 billion on GDP warrant coupons in the coming days, with expectations that much of that will be reinvested helping to buoy local bond prices.
The warrants pay out on Thursday based on the economic growth posted the previous year.
The government expects GDP to expand by about 9% this year, matching the growth seen in 2010 due to hefty fiscal and monetary stimulus, a consumer-spending spree, and strong demand for exports such as cars and grains.
While that growth is expected to slow somewhat next year due to a cooling in top trading partner Brazil, the government is still predicting a solid expansion. Last week, Central Bank President Mercedes Marco del Pont predicted GDP growth next year of about 6%, almost a full percentage point higher than previously forecast by the government.
The peso eased slightly to ARS4.2795 to the US dollar on the MAE local foreign-exchange wholesale market, compared to ARS4.278 on Wednesday. Markets were closed Thursday and Friday for national holidays to honor the Virgin Mary.
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com
Source: http://online.wsj.com