Argentine stocks slide in Wall Street, country risk nears multi-month low

Argentine stocks experienced a significant downturn on Wall Street, with ADRs falling as much as 6%, mirroring a decline in the local Merval index. YPF led the losses, followed by Transportadora Gas del Sur and Edenor, although some companies like Ternium and Corporación América saw gains. This market movement occurs against a backdrop of global economic monitoring, including corporate earnings reports and the Middle East conflict, alongside close attention to negotiations in Argentina's Congress.

In contrast to the stock market's performance, Argentina's country risk indicator continued its downward trajectory, reaching close to its lowest level since President Javier Milei took office. This decline, accumulating 20 points in the first days of August, suggests an improving perception of the country's sovereign debt among investors. Bond prices, both under local and global law, showed mixed but generally positive performance, with Global bonds seeing notable increases.

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Domestic assets are impacted by the external context, where “Wall Street tries to extend the recent bullish streak while monitoring earnings and the Middle East conflict”. Nevertheless, he pointed out that investors are closely following negotiations in Congress, as “it could be read in an electoral key”.

Economists attribute the domestic assets' volatility to external influences, but also emphasize the importance of legislative developments. Gustavo Ber, an economist at Estudio Ber, noted that investors are closely watching Congress, as potential outcomes could be interpreted through an electoral lens. The positive sentiment in sovereign debt appears partly driven by a perceived geopolitical de-escalation, which has reduced global risk premiums and oil prices.

In the currency market, the official wholesale dollar continued its upward trend, approaching its year-to-date maximum. However, it remains significantly below the upper limit of the currency band. The retail dollar rate showed stability on Tuesday. These currency movements present a complex picture, with the official rate appreciating while the country risk suggests growing investor confidence.

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The sovereign debt in dollars started August on the right foot” partly due to the rebound in Global bonds that have been supported since last Thursday. “The good external climate was driven by geopolitical détente, as Trump suspended the planned attack against Iran, which reduced the global risk premium and plummeted the price of crude oil,” they explained.