Argentine markets gripped for second day by election-related fears

BUENOS AIRES, (Reuters) - Argentina’s peso closed weaker again yesterday following a second day of market turmoil triggered by opposition candidate Alberto Fernandez’s landslide victory in a primary election that dealt a severe blow to President Mauricio Macri’s re-election chances.

The peso closed 4.29% lower at 55.9 per U.S. dollar after touching 59 to the dollar earlier. The currency had hit an all-time low on Monday of 65 to the dollar, a drop of 30%, on fears that a Fernandez government could take Argentina back to interventionist economic policies.

The central bank has sold $255 million of its own reserves since Monday to help steady the currency.

“The market thinks Fernandez will likely default and impose capital controls and renegotiate with the IMF. In a nutshell, the market thinks Fernandez is the return of populism,” said Claudio Irigoyen of Bank of America Merrill Lynch (BAML).

Fernandez, who has former President Cristina Fernandez as his running mate, pulled off a stunning upset in the primary with a widerthan-expected 15-point lead over Macri, a free-market proponent.

Monday’s crash in the peso unnerved global equities investors, with markets already jittery over the Sino-U.S. trade war and protests in Hong Kong.

“Yes, Argentina is a small economy. However, the last thing global markets want to see is another market-friendly government fall to populism and/or geopolitics,” said Rabobank strategist Michael Every.