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Argentine stocks down 12.76%, peso down 3%

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Latam stocks down 0.1%, FX flat

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Argentina's Peronists win election in Buenos Aires

province

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Brazil IGP-DI inflation up 0.2% in Aug

(Updates with afternoon trading)

By Pranav Kashyap, Twesha Dikshit and Nikhil Sharma

Sept 8 (Reuters) -

Argentine assets collapsed on Monday, with the local peso

hitting a historic low after a crushing

defeat

for President Javier Milei's party in local elections,

raising obstacles to the government's ability to advance its

austerity policies.

The peso dropped 3% to a record low, while

stocks sank nearly 13%, marking the sharpest daily drop

since March 2020.

Local financial firms were among the worst hit, with

Grupo Supervielle, Banco Macro, Banco BBVA

Argentina and Grupo Financiero Galicia

each falling more than 19%.

The opposition Peronist party triumphed in Sunday's

legislative elections in the province of Buenos Aires, leaving

the party of radical reformist Milei in a distant second place,

according to the provisional official tally.

Milei's defeat signals waning influence for the

libertarian president, who faces a tough road ahead as the

country approaches the October 26 midterm elections.

Buenos Aires, which accounts for nearly 40% of the South

American nation's total electorate, is widely seen as a

bellwether for the upcoming vote.

The country's international dollar bonds saw a

significant drop, with the 2038 issue falling about 6 cents to

the dollar.

Argentina's markets have come under pressure in recent

weeks, with

corruption allegations

swirling around Milei's

inner circle

, confidence gauges sinking, bonds and stocks selling off,

and the unpegged peso requiring intervention. One of emerging

markets' boldest reform stories now faces its toughest test.

"The elections in Argentina can pose significant market

volatility. Magnitude of the gap was surprising, but going into

the election, the risk was asymmetric given where prices had

gone and obviously in the aftermath of the scandal," said

Kathryn Exum, director and co-head of sovereign research &

strategy at Gramercy Funds Management.

"Investors are waiting to get through the electoral period

and then assess the kind of approach and ability to execute on

the next phase of policy in the aftermath of the elections."

A gauge tracking Latin American stocks

slipped 0.1%, while a similar gauge for currencies

remained flat near a record high.

Chilean equities dropped 1.3% and the peso

lost 0.54%. Data showed annual inflation easing to the top of

the central bank's target band, bolstering expectations for

further policy easing later this year.

Market participants expect the central bank to hold rates at

the conclusion of its two-day policy meeting on Wednesday, but

expect reductions later this year.

Meanwhile, in Brazil, inflation, as measured by the General

Price Index-Internal Availability (IGP-DI), rose 0.2% in August,

compared to a decline of 0.07% in the previous month, according

to fresh data.

Brazilian equities fell 0.54%, while the real

slipped 0.09%.

Brazilian President Luiz Inacio Lula da Silva said that more

trade and financial integration among the BRICS group of

developing nations would help mitigate the effects of

protectionism.

Mexican stocks gained 0.22%, while the peso

firmed 0.28% ahead of Tuesday's August inflation data, which is

expected to show a year-over-year rate of 3.58%, within

Banxico's target band of 3%, plus or minus one percentage point.

Mexico's central bank last month acknowledged sluggish

economic growth and projected higher price pressures for the

rest of 2025.

Key Latin American stock indexes and currencies:

Stock indexes

Latest Daily % change

MSCI Emerging Markets 1284.67 0.68

MSCI LatAm 2438.22 -0.1

Brazil Bovespa 141879.7 -0.53

Mexico IPC 60597.38 0.19

Chile IPSA 9089.29 -1.32

Argentina MerVal 1742764.33 -12.76

Colombia COLCAP 1867.91 0.27

Currencies Latest Daily % change

Brazil real 5.4182 -0.1

Mexico peso 18.646 0.28

Chile peso 969.94 -0.54

Colombia peso 3935.5 0.53

Peru sol 3.5055 0.41

Argentina peso (interbank) 1,407.0 -3.00

Argentina peso (parallel) 1,365.0 0.36