Argentina's benchmark MerVal stock index bounced back on Friday from 10-month lows, boosted by the US Federal Reserve's decision to cut its discount rate to boost liquidity, traders said. The MerVal closed up 5.2 percent at 1,929.12 points, after opening strong, paring gains, and then recovering again in the afternoon.
"Without a doubt, the Fed's decision gave global markets a breath of fresh air, but not everything's been resolved yet and the situation remains delicate," said Leopoldo Olivari, a trader with Bacque brokerage. Bonds also ended higher, gaining 3.5 percent on average in selective trade. Leading gainers, peso-denominated Disc bonds rose 6.6 percent in over-the-counter trade.
Bonds and the peso also made gains as investors returned to the market after the Fed's decision calmed global markets, which plunged on Thursday amid continued concerns over tightening credit in the US subprime mortgage sector.
Reflecting peso scarcity in recent days, Argentine interbank lending rates have risen, but they fell back 4.5 percentage points on Friday to 11.8 percent ahead of a central bank repos auction that had been announced the night before.
The central bank pumped 37 million pesos ($11.6 million) into local markets through auctions of repurchase agreements that priced at Badlar plus 0.6 percent to 1.75 percent. Badlar, the average bank rate on a 30 to 35 day deposit of more than 1 million pesos, currently stands at about 10 percent. The Argentine peso also rebounded after Thursday's four-year low.