Argentina Markets Plunge After Milei Party Defeat Buenos Aires

Argentina's financial markets experienced a sharp selloff following the significant defeat of President Javier Milei's party in the Buenos Aires provincial election, raising doubts about the government's ability to push through its economic reform agenda. The Peronist opposition's victory by over 13 percentage points exceeded market expectations, leading to a plunge in Argentine stocks by up to 24%, a nearly 6% drop in the peso against the dollar, and a steep decline in sovereign bonds, with some falling more than 10%. The country's risk premium surged to nearly 1,100 basis points, reflecting heightened political and economic uncertainty ahead of the national midterm elections scheduled for October 26. Analysts from JPMorgan, UBS, and Pimco cautioned that the election results could prolong Argentina's political risk and complicate currency management, warning that interventions to defend the peso might undermine IMF programs and increase default risks. The broad market selloff also affected Argentine shares trading in New York and exchange-traded funds, marking some of the largest losses since the pandemic began. Overall, the election outcome intensified concerns that Milei's administration will face an uphill battle in securing the necessary political support to implement its economic policies.