Argentina’s bonds fall sharply after Milei election drubbing

Javier Milei delivers a speech after learning the results of the elections - Juan Ignacio Roncoroni/EPA/Shutterstock

Argentina’s markets have fallen sharply after President Javier Milei was defeated in a crucial provincial election.

The shock election defeat has cast doubt on whether Mr Milei has the political support to push through his economic reforms.

The disappointment was felt in Argentina’s markets, with the country’s flagship stock market plunging 10.9pc. The peso fell 5pc against the US dollar and the country’s benchmark dollar bonds fell by as much as 10.5pc to trade at around 55 cents.

Investors were disappointed by the result of the election. Many had expected that a defeat of more than 5 percentage points would lead to a sell off in Argentinian assets.

Fernando Sedano and Simon Weaver, from Morgan Stanley, told investors that the election defeat increased the chances that “the market questions the likelihood of continued reforms, and uncertainty rises around the future external financing sources”.

On Sunday, Mr Milei vowed to “accelerate” his libertarian reforms, which has involved dismissing tens of thousands of public employees and a major deregulation drive.

His government faces now the difficult choice whether to allow the peso to depreciate ahead of next month’s mid-term elections or spend its foreign exchange reserves to intervene in the market, according to Pramol Dhawan at Pimco.

“Opting for intervention would likely prove counterproductive, as it risks ... diminishing the country’s prospects for future market access to refinance external debt,” Mr Dhawan said.

“The more resources the government allocates to defending the currency, the fewer will be available to meet obligations to bondholders – thereby increasing the risk of default.”

06:24 PM BST

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06:21 PM BST

Tax rises ‘becoming less credible’ for France

The collapse of France’s latest government leaves the eurozone’s second-biggest economy lurching deeper into a morass of feeble growth, high borrowing costs and a debt burden becoming one of Europe’s heftiest.

The successor to Prime Minister Francois Bayrou, after today’s no-confidence vote, is likely to rely more heavily on taxes than spending cuts to reduce the budget deficit.

The Socialists – from whose ranks the next prime minister could come – calling for a €15bn (£13bn) tax hike on the ultra-wealthy.

But financial markets may frown on tax increases, especially broader measures, fearful they may choke off growth – already a worry in Britain.

“What we’re increasingly seeing is a reluctance of market participants to buy the taxation route as a viable way to reduce big fiscal deficits,” said Russel Matthews, portfolio manager at RBC BlueBay Asset Management, which is betting against French bonds.

Story Continues

“It’s just becoming less credible,” he said.

05:39 PM BST

Argentine markets plunge after Milei’s party loses to Peronists in Buenos Aires vote

Argentina’s markets tumbled on Monday, with the peso currency at a historic low, after a heavy defeat for President Javier Milei’s party at the hands of the Peronist opposition at local elections stoked worries about the government’s ability to implement its economic reform agenda.

The peso fell sharply against the dollar, while its benchmark stock index fell 10.5pc, and an index of Argentine stocks traded on US exchanges lost more than 15pc.

Some of the country’s international bonds saw their biggest falls since they began trading in 2020 after a $65bn (£48bn) restructuring deal.

The resounding victory for the Peronists signalled a tough battle for Mr Milei in national midterm elections on Oct 26, where his party is aiming to secure enough seats to avoid overrides to presidential vetoes.

The government now faces the difficult choice whether to allow the peso to depreciate ahead of next month’s midterms or spend its foreign exchange reserves to intervene in the market, according to Pramol Dhawan at Pimco.

“Opting for intervention would likely prove counterproductive, as it risks derailing the IMF programme and diminishing the country’s prospects for future market access to refinance external debt,” Mr Dhawan said.

“The more resources the government allocates to defending the currency, the fewer will be available to meet obligations to bondholders – thereby increasing the risk of default.”

He said early indications that the government may double down on the current strategy “would be a strategic misstep”.

The 13-point gap in the Buenos Aires Province (PBA) election in favour of the opposition Peronists was much wider than polls anticipated and that the market had priced in. The government setback at the polls adds to recent headwinds for a market that had until recently outperformed its Latin American peers.

05:18 PM BST

FTSE 100 closes higher as gold and oil climb

The FTSE 100 made steady progress on Monday, supported by gains in the price of gold and oil.

The FTSE 100 index closed 0.1pc, at 9,221.14. The FTSE 250 ended 0.5 higher, at 21,684.45, and the AIM All-Share finished up 0.5pc, at 769.73.

It came as gold jumped to $3,644.14 an ounce against $3,589.49 dollars on Friday.

An index of FTSE mining companies rose 1.9pc.

Stephen Innes of SPI Asset Management said gold’s gains are the “logical crescendo of a market where [US] rate-cut wagers, political meddling and creeping stagflation fears are converging into a perfect tailwind for bullion”.

Mr Innes pointed out that gold has gained 9pc in the past three weeks and nearly 40pc in the year to date.

He said: “The political backdrop has turned gold into the ultimate protest asset. Trump’s tariff salvos have already juiced stagflation chatter, and his courtroom push to fire Fed governor Lisa Cook is cutting straight to the heart of central bank independence.

“Traders know this script – when faith in the Fed wobbles, gold becomes the one institution that doesn’t default, dilute or lie.”

It came as the cost of a barrel of oil reached $66.31 dollars late on Monday afternoon, up from $65.14 dollars on Friday.

The oil price rose after eight key members of the Opec+ cartel  said yesterday that they had decided to increase production by 137,000 barrels per day (bpd) from next month. Those countries had already increased production by 2.2 million bpd in recent months.

The pound rose to $1.3545 late on Monday afternoon, compared with $1.3527 at the stock market close on Friday.

05:08 PM BST

Global stock markets rise despite upheaval in France and Japan

Global stock markets rose Monday as traders focused on political upheaval in France and Japan, along with rising hopes of US interest rate cuts.

“Political uncertainty is making waves on markets at the start of the week, but sentiment remains largely upbeat,” noted Susannah Streeter, head of money and markets at Hargreaves Lansdown stockbrokers.

“The resignation of Japan’s Prime Minister has caused ructions, with the yen diving on the news, stocks making sharp gains and government bond yields rising again.”

In Europe, the Paris stock market climbed and the euro rose as French Prime Minister Francois Bayrou was set to lose a confidence vote in parliament on Monday, costing him the job after nine months in the role.

Mr Bayrou blindsided even his allies by calling a confidence vote to end a months-long standoff over his austerity budget.

In a speech to lawmakers on Monday, Mr Bayrou called France’s debt level “life-threatening” for the country, adding: “The biggest risk was not to take one, to let things continue without anything changing...”

The European Central bank is expected to hold interest rates steady again this week with inflation under control and US tariff tensions easing.

France’s Cac 40 rose 0.8pc, Germany’s Dax added 1pc and the S&P 500 rose 0.3pc. The FTSE 100 added 0.1pc and the FTSE 250 rose 0.5pc.

05:01 PM BST

Volkswagen plans cheaper cars in fightback against Chinese rivals

Europe’s top car manufacturer Volkswagen has unveiled a series of more affordable electric vehicles as Chinese EV titan BYD said it would start producing a cut-price model on the continent.

The duelling announcements at the closely-watched Munich auto show highlight the fierce battle shaping up between Europe’s traditional carmarkers and fast-growing Chinese rivals.

VW – along with peers BMW and Mercedes-Benz from the long troubled German auto sector – are seeking to make up lost ground in the race for electric dominance.

Volkswagen unveiled four small EV models from its namesake VW brand, as well as its Cupra and Skoda marques.

With starting prices of around 25,000 euros (£21,700), lower than many current EVs made by European manufacturers, their commercial launch is set for next year.

But at a press event at the IAA Mobility show, which runs the whole of this week, chief executive Oliver Blume conceded that VW faced a tough fight.

“The automotive industry, and especially the Volkswagen group, has never faced so many headwinds at the same time,” he said.Volkswagen’s press conference at IAA Mobility 2025 - Anna Szilagyi/Shutterstock Editorial

04:27 PM BST

Russia in talks to issue bonds in China

Russia and China are in discussions regarding the placement of Russian corporate bonds in the Chinese market, Russia’s Ria news agency has reported.

Russia’s finance ministry has reported said it sees interest among Russian companies in placing their bonds in China.

Top Russian companies including Russia’s vast nuclear corporation Rosatom and giant gas concern Gazprom are understood to be exploring sales of yuan-denominated bonds.

04:06 PM BST

Car giant urges EU to rescue auto industry

The new boss of car giant Stellantis has called on the EU to rescue the region’s automotive industry.

Antonio Filosa, chief executive of Stellantis, said it was “vital” that the EU show flexibility on the transition to electric vehicles in order to protect the auto industry.

He said: “A strategic dialogue is very important, but now it’s vital to act with urgency. There is no time for delays.”

Mr Filosa urged the bloc to support the sale of hybrid vehicles to reduce the average age of cars on the road and said that EU emissions targets were “unrealistic”.

He also warned the bloc’s regulation was increasing the cost of small cars, causing a drop in the number of cars sold and put the auto industry at risk.

The EU will ban the sale of new petrol and diesel cars in 2035 as part of its net zero targets. Some car markers have warned the ban could impact their sales and the emissions targets are no longer feasible for the industry.

Mr Filosa said: “A European policy that encourages the replacement of older cars with new cars and a wider choice of powertrains would have a greater impact on global CO2 emissions than the annual new car market does.”

His comments come as European car makers grapple with the impact of tariffs and face growing competition from Chinese rivals, such as BYD.

Mr Filosa became head of Stellantis in June. The company owns a range of car brands, including Vauxhall, Fiat, Peugeot and Jeep.

Ursula von der Leyen, the president of the European Commission, will meet business leaders from the automotive sector on Friday to discuss the future of the industry.

03:54 PM BST

Brazil’s Lula denounces Trump’s tariff ‘blackmail’

Brazilian president Luiz Inacio Lula da Silva has denounced what he called “tariff blackmail” as the South American giant deals with a 50pc tariff imposed by Donald Trump.

“Tariff blackmail is being normalised as an instrument for market conquest and to interfere in domestic affairs,” Mr Lula said during a virtual meeting of emerging market Brics leaders.

Other participants included China’s Xi Jinping, Vladimir Putin of Russia and South Africa’s Cyril Ramaphosa.

Brazil’s exports to the United States plunged 18.5pc year-on-year in August after Mr Trump slapped his highest level of trade tariff on a range of goods from Latin America’s biggest economy.

Mr Trump is punishing Brazil for what he calls a “witch hunt” against his ally, former far-Right president Jair Bolsonaro.

Brazil has said it is considering retaliatory trade measures against the United States, and has asked the World Trade Organisation for help in resolving the dispute.Vladimir Putin attends an online meeting with Luiz Inacio Lula da Silva and other Brics leaders

03:48 PM BST

Wall Street rises on hopes of a rate cut

The S&P 500 and the Nasdaq have risen this afternoon on hopes that the Federal Reserve will lower borrowing costs soon.

A troubling non-farm payrolls report on Friday confirmed a weakening US job market, stoking fears of a potential slowdown in the world’s biggest economy.

Following the report, traders solidified their expectations for several rate cuts this year.

Money markets are almost fully pricing in three rate cuts during the rest of 2025.

Barclays now anticipates three cuts of a quarter of a percentage point each this year, while Standard Chartered expects a half point trim in September.

“Markets are trying to understand if the (September) rate cut is going to be enough to stave off further weakening of the economy and that’s why you see a market that is just neutral,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

The S&P 500 is up 0.3pc, the Nasdaq is up 0.8pc and the Dow Jones is roughly flat.Wall Street rose this afternoon - Jeenah Moon/Reuters

03:38 PM BST

Xi attacks protectionism after pressure from Trump

Xi Jinping, the Chinese president, has called on emerging economies to support globally agreed trade rules and resist protectionism in the face of Donald Trump’s trade war.

He told a virtual summit of emerging market countries known as Brics: “No matter how the international situation changes, we must unwaveringly promote the construction of an open world economy, share opportunities and achieve win-win outcomes through openness.

“We must maintain a multilateral trading system centred on the World Trade Organisation and resist all forms of protectionism.”

He said: “At this critical juncture, the Brics spirit of openness, inclusiveness and win-win cooperation, jointly defend multilateralism and the multilateral trading system, advance greater Brics cooperation, and build a community with a shared future for humanity”

The comments, first reported by Chinese state news agency Xinhua, come after Donald Trump upeneded global supply chains with a series of zig-zagging tariff announcements.

03:11 PM BST

Argentinian bonds fall after Milei loses provincial election

Argentinian bonds have fallen sharply after President Javier Milei was defeated in a crucial provincial election.

The shock election defeat has cast doubt on whether Mr Milei has the political support to push through his economic reforms.

The disappointment was felt in Argentina’s markets as the peso fell 7pc against the US dollar to 1,450. The country’s benchmark dollar bonds fell by 10.5pc to trade at around 55 cents.

Investors were disappointed by the result of the election. Many had expected that a defeat of more than 5 percentage points would lead to a sell off in Argentinian assets.

Fernando Sedano and Simon Weaver, from Morgan Stanley, told investors that the election defeat increased the chances that “the market questions the likelihood of continued reforms, and uncertainty rises around the future external financing sources”.

Fresh from this defeat in Buenos Aires province, Mr Milei now faces a nationwide mid-term congressional election on October 26.

02:28 PM BST

Gold hits fresh record high on US rate cut hopes

Gold prices have climbed above $3,600 to hit a record high as concerns about central bank independence and expectations of a US interest rate cut boost demand for the precious metal.

The price of spot gold rose 0.8pc to 3,613.87 on Monday morning.

Investors have been flocking to gold as they search for other assets because lower interest rates tend to lead to lower returns from cash and bonds.

It comes after downbeat jobs figures released on Friday raised the prospect that the Federal Reserve will cut interest rates when it meets next week.

Gold has risen over 35pc this year as investors pile into the precious metal. It is also in demand because it acts as a hedge against inflation and is viewed as the ultimate safe haven asset.

Some investors are worried that the US is facing a combination of high inflation and slow growth - known as stagflation.

Mark Haefele, from UBS, expects gold to “benefit from lower real rates and ongoing geopolitical risks”. The bank believes gold will climb even further to reach $3,700 per ounce by the end of June 2026.

Traders are also awaiting the outcome of Donald Trump’s attempt to sack Federal Reserve governor Lisa Cook. The US President’s latest move to criticise the central bank has added to worries about its independence.

Trump’s attempt to oust Ms Cook is currently making its way through the American court system and is just the latest in a series of attacks against the Fed.

The US President has also repeatedly called Federal Reserve chairman Jerome Powell a “numbskull” and labelled him Mr “too late” Powell.

02:15 PM BST

The Trumps’ conversion from ‘real estate guys’ into die-hard BitcoinersTrump face on a crypto coin

In Mr Trump’s first term, he famously described Bitcoin as a “scam”, but he has become an enthusiastic convert. During his second stint in the White House, he has presented himself as the most crypto-friendly president in history. At the same time, the Trump family has made billions from a series of crypto ventures.

Last week, two of the family’s crypto investments were valued at a combined $6.5bn (£4.8bn), more than it has ever made from generations in the real estate business.

The moment Mr Trump was converted is believed to have come shortly after he was booted out of the White House.

01:50 PM BST

The UK faces ‘a slowdown in economic activity’, Deutsche Bank warns

The UK is heading for a slowdown in economic activity in the second half of the year, analysts at Deutsche Bank have warned.

The forecast of sluggish economic activity comes amid a slump in employment and slowing wage growth.

The bank expects that declines in exports, public sector spending and stockpiling will all weigh on economic growth in the final six months of 2025.

Sanjay Raja, a senior economist at Deutsche Bank, said that uncertainty over the upcoming autumn Budget will be “hanging over household consumption and business investment”.

Rachel Reeves revealed last week that her autumn Budget will take place on November 26. She is widely expected to increase taxes this autumn in a bid to plug a black hole in public finances.

Despite the economic headwinds, the bank still expects the British economy to grow albeit at a sluggish rate of 0.2pc quarter on quarter.

12:22 PM BST

Rachel Reeves’s Budget delay leaves Britain’s battered pubs in limboRachel Reeves pouring a pint

Rachel Reeves’s Budget delay is leaving Britain’s struggling pubs in limbo, bosses have warned.

Hospitality chiefs said the decision by the Chancellor to push back her autumn Budget until the end of November – its latest date in 10 years – risks preventing them from planning for the new year at a time when many are already struggling with earlier tax rises.

Ms Reeves revealed last week that her autumn Budget will take place on Nov 26, meaning it will fall just before the festive period, which is critical for pubs and restaurants. Last year’s Budget was held on Oct 30.

11:57 AM BST

Borrowing costs edge lower in France

French borrowing costs have edged lower despite the upcoming political turmoil this afternoon.

Benchmark borrowing costs in France slipped 0.3pc to 3.43pc as tensions in the bond market eased ahead of a vote of confidence in French Prime Minister François Bayrou later this afternoon.

Bayou is largely expected to lose the vote of confidence which is due to begin at 3pm but traders have largely shrugged off concerns about political uncertainty.

French stocks made gains in the run up to the vote. The pan-European STOXX 600 index gained 0.3pc and France’s benchmark CAC 40 added 0.4pc.

The rise in equities likely means that markets have priced in the latest political drama in Paris.

11:22 AM BST

Oil prices rise as Russia braces for fresh sanctions

Oil prices rose on Monday as Russia braces for the impact of new EU sanctions and markets anticipate a glut of supplies as Opec ramps up production.

Brent crude, the international benchmark, climbed 1.8pc to $66.70 per barrel as the bloc piles pressure on Vladimir Putin to end the war against Ukraine.

It also comes after the OPEC cartel of oil producing nations, which includes Russia, voted to increase production by 137,000 barrels a day in October, risking a glut of supplies on the market.Russia Saudi Arabia OPEC oil prices

The International Energy Agency has warned the world faces a record supply of oil next year just as global demand slumps.

Opec’s decision to increase production marks a reversal of cuts that were set to remain in place until the end of 2026.

Following a meeting on Sunday, the group, which also includes Saudi Arabia and Iran, said that restarting the remainder of the 1.66m barrels of cuts would be contingent on “evolving market conditions,” and increases could be reversed.

10:28 AM BST

Why even an IMF bailout couldn’t save Britain nowRachel Reeves at the IMF

Bailouts from the International Monetary Fund (IMF) are painful.

Five decades ago, Britain was on the receiving end of its biggest-ever rescue package after a sterling crisis and bond buyers’ strike forced Labour chancellor Denis Healey to go cap-in-hand to the Washington-based institution.

After years of the country living beyond its means, a $3.9bn (£2.9bn) loan was granted in exchange for Britain agreeing to higher taxes and the deepest cuts in government spending on record.

Some are now asking whether history is on course to repeat itself. Rachel Reeves has been forced to deny that Britain is heading down this path. The Chancellor this week dismissed the prospect as one that had not been considered by “serious” economists.

09:48 AM BST

Tariffs have cost Volkswagen ‘several billions’

Tariffs have cost Volkswagen billions of euros so far this year as the German car manufacturer warns of the impact of the US trade war.

The Volkswagen Group, which includes the Audi, Porsche, Cupra and Skoda brands, has been impacted by high levels of tariffs on the automotive industry.

Oliver Blume, the chief executive of Volkswagen, said “it’s several billion euros on our balance sheet that this situation costs this year”.

Mr Blume added the carmaker was holding “very positive discussions” with the U.S. government around tax breaks for planned investments.Oliver Blume said tariff were costing Volkswagen billions - Liesa Johannssen/Reuters

The company is waiting for the US to reduce tariffs on cars manufactured in the EU from 27.5pc to 15pc, a move the Trump administration has pledged to do but not yet implemented.

Mr Blume said the company was holding “very positive discussions” with Trump’s administration around potential tax breaks for future investment in the US.

09:14 AM BST

German exports hit by trade tensions

German exports fell unexpectedly in July as the EU’s trade deal with the US failed to put a stop to a decline in shipments.

Exports from Germany dropped 0.6pc in July, falling short of economists’ predictions of a 0.1pc increase.

Shipments to the US declined 7.9pc compared to June as the effects of Trump’s trade war filtered through to the EU’s biggest economy.

The US agreed a trade deal with the EU to impose a 15pc tariff rate on exports from the bloc.

It is anticipated that Germany’s export orientated economy and its crucial automotive industry will be badly affected by tariffs.

The US was Germany’s largest trading partner in 2024, exporting €161.3 billion worth of goods last year.

Despite concerns about trade, the country reported a 1.3pc increase in industrial production during July, compared to the previous month.

The rise in industrial production was largely driven by the country’s manufacturing and automotive industries.

08:50 AM BST

Chinese exports to the US fall 33pc

China’s exports increased at a slower-than-expected rate last month as the impact of trade tensions with the US started to weigh on the country.

Exports from China rose 4.4pc in the 12 months to August, slowing from export growth of 7.2pc in July, and missing analysts’ forecast of a 5.2pc increase.

It marks the slowest pace of growth for Chinese exports in six months.

Shipments from China to the US declined by 33pc in August as growing uncertainty over trade between the two countries weighs on exports.

Donald Trump announced a 90 day pause on tariffs with China in mid-August, just days before his last agreement with the country was about to end.

08:30 AM BST

London markets open

The FTSE 100 began the week higher, climbing 0.2pc in early morning trading on Monday.

Rising oil prices provided a boost to shares in BP and Shell, which gained 1.7pc and 1.2pc respectively.

The blue-chip index was also lifted by aerospace and engineering companies, including Babcock International.

The FTSE 250 rose 0.3pc as bootmaker Dr Martens and Harbour Energy boosted the mid-cap index.

07:53 AM BST

5 things to start your day

Ministers scramble to gag drug giants amid fears of Trump tariff showdown | Downing Street ‘desperate’ to prevent president’s intervention over NHS rebates row Jobseeker numbers surge at fastest pace in five years| Sharp rise in layoffs and hiring cutbacks as companies brace for more tax rises Robot missile warships to boost Royal Navy firepower | New designs will help British fleet overcome ‘worrying’ crew shortages Reform to meet with Andrew Bailey after attack on Bank policy | Richard Tice claims Threadneedle Street agrees his idea to stop interest payments to banks is ‘right’ Kallum Pickering: Starmer must use the Budget to change course on the economy | The risks to the PM of tying his fate to the economy can pay off if he takes bold steps

07:30 AM BST

What happened overnight

Good morning

Thanks for joining me.

The yen fell in Japan after Prime Minister Shigeru Ishiba said he will step down after less than a year in the role.

The currency slid by as much as 0.8pc against the US dollar because of concerns that political turmoil in the world’s fourth largest economy will make it less likely that the Bank of Japan will increase interest rates.

However, shares in Japan rose on investors hopes of an increase in government stimulus under a new leader. The Nikkei 225 rose 1.2pc.

Trading in Asia was boosted after Friday’s jobs report in the United States lifted expectations that the Federal Reserve will cut rates at each of its three remaining meetings this year. The Hang Seng climbed 0.85pc in Hong Kong.

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