Jornada Financiera: Incertidumbre de Aranceles Impacta Mercados y Aumenta Riesgo País
- External financial uncertainty has dragged down Argentine assets, reversing a recent recovery trend.
- Felipe Mendoza, a financial market analyst at ATFX Latam, summarized the situation: "The uncertainty continues to dominate the sentiment of the investors.
- The Argentine stock market mirrored the selling trend seen on Wall Street, with losses ranging from 1.4% to 2%.
Financial Uncertainty Impacts Argentine Assets
Table of Contents
External financial uncertainty has dragged down Argentine assets, reversing a recent recovery trend. The primary trigger for this downturn was the declaration by the US President, Donald Trump, of a potential 200% tariff on European wine, champagne, and other alcoholic beverages if the european Union (EU) does not retract its 50% tariff on American whiskey. According to NBC, this action is a response to the EU’s decision to tax whiskey in retaliation for Washington’s tariffs on European steel and aluminum.
Felipe Mendoza, a financial market analyst at ATFX Latam, summarized the situation: “The uncertainty continues to dominate the sentiment of the investors. With the trade conflict in escalation and the geopolitical tensions persistent, the markets shall prepare for a major volatility in the next months.”
The Argentine stock market mirrored the selling trend seen on Wall Street, with losses ranging from 1.4% to 2%. Both Argentine stocks and public bonds experienced declines amidst local and external turbulence, fostering a strong aversion to risk investments.
Market Performance and Key Indicators
The leading stock index, S&P Merval, on the Buenos aires Stock Exchange, fell by 1.8%,to 2,232,179 points,after a 5.3% surge the previous day due to portfolio repurchases following recent declines. Among the ADRs and shares of Argentine companies traded in dollars on Wall Street,losses prevailed,led by IRSA,with a 6.4% drop, and Edenor with a 5.4% decrease.
Delphos Investment reported, “The doubts on the economic plan and the volatility of the international markets initiated a bearish trend that began after the payment of coupons in January, when the bonds reached their maximums.” They added, “In this context, the market adopts a posture of wait and see, waiting for a new catalyst, as it could be the disbursement of the International Monetary Fund or a resounding victory in the elections, which could lead the country risk to resume its downward trend.”
The Milei government is currently negotiating a new credit agreement with the IMF, which woudl provide the country with fresh funds to consolidate the current economic program.This week, Milei signed a Necessity and Urgency Decree (DNU) to advance the negotiations without providing specific details.
Sovereign dollar bonds, both Bonares and globales, saw an average decrease of 0.5%,while Argentina’s country risk,as calculated by JP Morgan,increased by 30 units,reaching 748 basis points.
Factors Contributing to Market Instability
Political and social tensions, stemming from protests against President Javier Milei’s economic adjustment measures, added to global concerns about US tariff pressures and an inflation report in the United States that reinforces expectations of a future interest rate cut.
Juan Manuel Franco, Chief Economist at Grupo SBS, noted, “In the local level, the short-term look will be in the inflation data to be known on Friday.We highlight that, even though there was a strong deceleration in the inflation of CABA, this was influenced in great part by the deflation in air transport. We highlight that the inflation of meat was in 7.7% monthly in CABA and that this item weighs more in the national inflation, so it will be necessary to see what final impact ends up having in the CPI.Also, the parliamentary activity will be monitored regarding the DNU of the agreement with the IMF at the same time that it will be attentive to if some more detail is known on how the agreement could end up being.”
A recent Reuters survey estimated that the Consumer Price Index (CPI) from INDEC would show an increase of 2.4% in February, slightly higher than the previous month.
Currency Market Update
The price of the free dollar advanced five pesos,or 0.4%, this Thursday, to $1,235 for sale. Marking its second day of increase, the informal currency reached its highest price as February 25. With the wholesale dollar gaining 25 cents to $1,067 per unit, the exchange rate gap stands at 15.7 percent.
The amount traded in the wholesale market was not critically important this Thursday, totaling USD 309.3 million in the spot segment, with purchases on behalf of the Central Bank for USD 50 million, representing 16.2% of the private offer.
So far in March, the monetary authority has achieved a net buying balance of USD 624 million, marking the eighth month with a positive result from its exchange intervention.
The gross international reserves increased by USD 143 million,now at USD 28,102 million,after hitting the lowest level as September 30,2024,on Tuesday.
Economist Gustavo Ber commented, “The financial dollars continue very calm, with a BCRA that continues accumulating reserves taking advantage of the greater seasonality in the offer of currencies of the field ahead.” He added, “Beyond the tranquility, the operators continue attentive to the eventual novelties on the exchange regime that could arrive to be included in the new program with the IMF.”
Financial Uncertainty in Argentina: A Complete Q&A Guide
This article addresses common questions surrounding the recent financial uncertainty impacting Argentine assets, providing insights into the causes, market performance, and potential future catalysts.
Understanding the Market Downturn
Q: What factors have contributed to the recent downturn in Argentine assets?
Several factors converged to create a challenging surroundings for Argentine assets:
Global Trade Tensions: The threat of tariffs, specifically those announced by then-US President Donald Trump on European goods in response to EU tariffs on American whiskey, sparked concerns about escalating trade conflicts.
Domestic Economic Concerns: Doubts surrounding the Argentine economic plan contributed to investor unease.
Political and Social Tensions: Protests against President Javier Milei’s economic adjustment measures added to the instability.
US Inflation Data: An inflation report in the United States reinforced expectations of a future interest rate cut.
Q: How did global trade tensions specifically impact Argentine markets?
Threats of tariffs and retaliatory measures between major economies create uncertainty in global markets. Argentina, being an open economy, gets affected through:
Investor Sentiment: Global uncertainty fosters risk aversion, causing investors to pull back from emerging markets like Argentina.
Trade Flows: Changes in tariffs can affect Argentina’s trade relationships and export competitiveness.
Q: What was Felipe Mendoza’s analysis of the situation?
Felipe Mendoza, a financial market analyst at ATFX Latam, stated that “The uncertainty continues to dominate the sentiment of the investors. With the trade conflict in escalation and the geopolitical tensions persistent, the markets shall prepare for a major volatility in the next months.”
Market Performance and Key Indicators
Q: How did the Argentine stock market perform?
The Argentine stock market mirrored the Wall Street selling trend. The leading stock index, S&P Merval on the Buenos Aires Stock Exchange, fell by 1.8% to 2,232,179 points.
Q: Which Argentine stocks experienced the most significant losses?
Among Argentine companies traded on Wall Street, IRSA experienced a 6.4% drop, and Edenor decreased by 5.4%.
Q: What is Argentina’s country risk, and how has it changed?
Argentina’s country risk, as calculated by JP Morgan, increased by 30 units, reaching 748 basis points. A higher country risk indicates a greater perceived risk of investing in Argentina.
The Role of the IMF and Economic Policy
Q: What is the current status of Argentina’s negotiations with the IMF?
The Milei government is actively negotiating a new credit agreement with the IMF to secure fresh funds for consolidating its economic program. President Milei signed a Necessity and Urgency Decree (DNU) to expedite the negotiation process, though specific details remain undisclosed.
Q: What potential catalysts could reverse the bearish trend in the Argentine market?
Delphos Investments suggests that potential catalysts include:
Disbursement of funds from the International Monetary Fund
A resounding victory in elections
Q: What is Juan Manuel Franco’s outlook on inflation data?
Juan Manuel Franco, Chief Economist at Grupo SBS, noted that even though there was a strong deceleration in the inflation of CABA, this was influenced in great part by the deflation in air transport.
currency Market Dynamics
Q: What were the key trends in the currency market?
* Free Dollar: The price of the free dollar advanced five