Markets are looking for relief after the rate hike and the tussle in Congress, amidst a climate of political and economic uncertainty.

Argentine financial markets are experiencing a week marked by volatility and political tension. After two days of sharp declines, a partial recovery was seen in stocks and bonds this Thursday , amid a backdrop of rising interest rates and congressional disputes.

At midday, the S&P Merval index on the Buenos Aires Stock Exchange was up 1.2%, hovering around 2,100,000 points , after having lost more than 5% in the previous two trading sessions. On Wall Street, Argentine stocks (ADRs) were also showing a rebound, with notable gains such as that of Corporación América, which climbed nearly 8%.

Dollar-denominated bonds, which had been hit by political uncertainty and rising interest rates, also posted moderate gains, reflecting a somewhat cautious climate but with signs of recovery.

The rebound comes after the Chamber of Deputies overrode the presidential veto of the Disability Emergency Law and approved the distribution of National Treasury Advances (ATN) to the provinces. While the ruling party managed to hold back the increase in pensions, analysts warn that the lack of legislative agreements adds to the government's fiscal strategy.

Economy Minister Luis Caputo attempted to convey calm in his address to the Council of the Americas . There, he stated that the administration "will not budge one iota from the economic plan" and described the political obstacles as "short-term obstacles" that, he argued, "will end up working in favor" of the ruling party.

The other key factor of the week was the jump in the stock market guarantee rate, which reached an unusual 150% annual rate in one day before retreating and stabilizing around 50%. This imbalance impacted banks, which pushed fixed-term rates above 50% to retain liquidity.

"There's clearly a rate with a floor, but no ceiling," warned Romano Group analyst Salvador Vitelli . According to experts, the firmness of rates competes directly with the profitability of stocks and bonds. At the same time, it increases the cost of credit and impacts economic activity.

The latest data from INDEC show that in June the Monthly Estimator of Economic Activity (EMAE) fell 0.7% monthly. However, year-on-year growth was 6.4%. In the first half of the year, the economy accumulated growth of 6.2%, although it is still 1.8% below its 2022 peak.

The SBS Group noted that the June decline was in line with industry indicators. However, they cautioned that the rebound in activity depends largely on macroeconomic stability and market confidence.

With the October legislative elections on the horizon and the government's need to expand its representation in Congress, traders agree that politics will continue to drive the pulse of financial assets.

" We're in a situation where politics is muddying the playing field and excessive rates are generating more uncertainty. The market readjusts daily according to the situation ," summarized a Bull Market Brokers trader.

For now, the markets are finding some breathing space. But the combination of political turmoil, high interest rates, and doubts about the ability to sustain the fiscal surplus is keeping investors on edge.