Argentina’s Macri faces uphill race for re-election after weak primary

BUENOS AIRES (Reuters) – Argentine bonds fell in London trading and further volatility loomed on Monday after voters soundly rejected President Mauricio Macri’s austere economic policies in primary elections, casting doubt on his chances of re-election in October.

Opposition candidate Alberto Fernandez – whose running mate is former president Cristina Fernandez de Kirchner – won by a wider-than-expected 15.5 percentage points with 47.65% of votes, with 99% of ballots counted after Sunday’s primary.

The victory by Fernandez’s Frente Todos coalition far exceeded the margin of 2-8% forecast in recent opinion polls.

Analysts made the following comments:

JP MORGAN

  “The unexpected gap in favor of the opposition candidate Alberto Fernandez is so wide that makes it very likely for Frente Todos to win the election in October.”

“The pressure on financial markets is to mount on higher probability of policy discontinuity.”

CAPITAL ECONOMICS

“With a renewed focus on sovereign default risks, bonds, equities and the peso will come under severe pressure in the coming days. That said, falls in the currency might be tempered by intervention in the foreign exchange market.”

  “Heavy FX intervention could see markets test the central bank’s resolve, forcing it to run down its reserves.”

CREDIT SUISSE

“Another sharp and sustained episode of financial volatility that interrupts the recent downward trend in inflation, improvement in confidence and recovery in economic activity could increase voter frustration with Macri and lead his support to erode from current levels.”

ARGENTINE BROKERAGE BALANZ

“we would expect pressures on the FX for a 12% to 15%depreciation.”

POLITICAL ANALYST IGNACIO LABAQUI

“The primaries’ result is nearly impossible to reverse in October.”

“In the end, the bulk of the electorate punished the government for its poor economic performance.”

Reporting by Gabriel Burin, writing by Hugh Bronstein; Editing by Nick Zieminski



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