Markets in the red: the dollar rises and Argentine stocks and bonds plunge

Less than two weeks before the provincial elections, the Argentine financial market is turning red. The dollar has risen for the fourth consecutive day, reaching $1.370 at major banks. At these prices, the retail exchange rate is approaching the highs it reached in late July.

After a turbulent week, Argentine assets are starting Monday on the decline, with the market paying close attention to political and financial noise ahead of the government's first electoral test on September 7. On Wall Street, Argentine banks continue to bear the brunt, losing nearly 8%. Dollar bonds are also continuing their drain, trading down as much as 3.3% on Monday.

The hardest-hit stock among Argentine ADRs is Banco Supervielle. Edenor and Banco Macro round out the list of worst-performing companies, with declines of 6.2% and 5.4%, respectively.

In the local market, the Merval index has lost 5% in dollar terms since the opening bell. So far in August, the main indicator of the Buenos Aires Stock Exchange has fallen more than 11% in hard currency, with the biggest hit in the final trading sessions.

"Some local factors, such as the balance sheet season, and others from the political perspective, such as Congress pushing through measures that would be detrimental to fiscal balance , pressured the index," PPI reported. Monday's drop in stock prices is accompanied by a negative tone in global markets. In New York, the Dow Jones Industrial Average fell 0.5%, while the S&P 500 fell a slight 0.1%.

" Wall Street is returning to a calmer tone after celebrating the Fed's more dovish stance , despite which domestic assets are under pressure from political noise within an election season that continues to raise the temperature already on the way to PBA," explained economist Gustavo Ber. "Domestic assets continue to be less influenced lately by the external climate and more by local political and economic dynamics, as tensions intensify within the electoral calendar ," he added.

The market is getting nervous after the scandal associated with possible corruption at the National Disability Agency, which hits the heart of the government just weeks before the elections. These are difficult days for the ruling party: in addition to the pressure over peso-denominated rates and the unintended effects of monetary tightening, the setback in Congress and these suspicions are compounded, which, in the opinion of traders, diminishes the chances of La Libertad Avanza obtaining a significant margin at the Buenos Aires polls.