S&P Merval in dollars rebounded 3% in July, but country risk ended its three-month downward streak

By: rootdata|2026/07/31 21:57:00

July left a mostly positive balance for Argentine assets, in a month that combined signals of consolidation on the local front, with accumulation of reserves, ongoing disinflation, and the announcement of the reform of the Central Bank's Organic Charter, but with an international context going against the grain, which tightened again due to geopolitics, the surge in oil prices, and a earnings season that cast doubt on the return of investments in artificial intelligence.

Thus, during the month, the S&P Merval yielded 4% in pesos and 3% in dollars, favored by the relative exchange rate stability, while energy stocks once again drove the leading panel. In contrast, sovereign debt in dollars could not keep up and country risk rose 2%, breaking the downward streak it had maintained since April, despite Moody's rating upgrade at the end of the month.

The macro front consolidated, but activity continued at two speeds

The narrative of stabilization from the economic team was reinforced during July, although the improvement remained concentrated in the sectors linked to the external front and coexisted with uneven internal activity.

In exchange matters, the wholesale dollar advanced 0.2% and ended near $1,485, while the blue dollar rose 3% to $1,560 and financial operations were relatively calm. However, Juan Manuel Franco from SBS Research warned that the demand for coverage remains present and could intensify towards the 2027 electoral cycle. He also recalled that the A3500 hit a nominal high of $1,499.84 and the CCL reached $1,600, although both corrected after the Treasury auction.

At the same time, the June CPI was 1.9% monthly and 33.5% year-on-year, thus breaking through 2% for the first time in ten months and consolidating the disinflation that began in April. In this context, SBS maintained a favorable view on the short fixed rate as a carry vehicle, although Franco emphasized that "managing exchange rate risk remains crucial".

On the other hand, the BCRA bought $2.162 billion in July and accumulated $13.327 billion for the year, despite interrupting a streak of 135 sessions with a positive balance. Meanwhile, reserves remained around $49 billion during the month, and during her visit to Buenos Aires, Kristalina Georgieva praised this performance and urged to "keep buying". She also stated that the IMF did not see the need for additional financing, although SBS reminded that Argentina must pay more than $2.7 billion to the organization during the rest of the year.

The most significant institutional data arrived on July 30, when Javier Milei announced the submission to Congress of the reform of the BCRA's Organic Charter. The project aims to limit its mandate to monetary stability, prohibit financing to the State, eliminate non-transferable letters, and make it difficult to remove its authorities. Additionally, it incorporated the "fiscal shackles", which would trigger an automatic spending adjustment in the event of two consecutive quarters of primary deficit without a corrective plan.

From Guardian Capital, they considered that the initiative represents "the most powerful institutional signal since the start of the program", because it could create a monetary anchor that transcends governments. However, they warned that its approval is not guaranteed in an election year.

Finally, the EMAE for May fell by 0.5% month-on-month and grew by 0.2% year-on-year, with agriculture, mining, and energy on the rise, while industry, commerce, and financial intermediation remained weak. In the same vein, Guardian Capital noted that oil, gas, mining, and agriculture led the improvement, but construction, services, and logistics lagged behind. Nevertheless, the trade balance recorded a surplus of $3.504 billion and accumulated thirty positive months, driven by record exports of $9.537 billion.

The BCRA maintained the accumulation of reserves while the Government pushed for a reform to strengthen its autonomy.

Energy Stocks Boost S&P Merval

The S&P Merval closed July with 13 of its 20 stocks rising and advanced 4% in pesos and 3% in dollars, favored by exchange rate stability and energy momentum. However, Research from IEB indicated that the index lateralized around $2,100 and considered that the earnings season could break that dynamic.

In this context, YPF led the gains with a 14% increase, followed by Metrogas, which gained 12%, Edenor, which increased 8%, and Pampa Energía, which added 8%. In contrast, Transener fell 5%, Grupo Valores lost 5%, and BYMA declined 4%.

The sectoral reading confirmed this predominance. In this sense, Energy averaged a 6% improvement, with YPF, TGS, and Comercial del Plata among the main drivers, while Public Services gained 5%. Meanwhile, Financial Services ended nearly neutral, as the gains of Galicia, Supervielle, and Banco Macro were offset by the losses of Grupo Valores and BYMA. In contrast, Materials fell, affected by Ternium and Aluar.

The energy performance was supported by the increase in production and higher oil prices. According to IEB, crude averaged $96.68 per barrel during the second quarter, 44% higher than a year ago, while restrictions in the Strait of Hormuz and negotiations between Iran and the United States raised volatility.

Additionally, the firm maintained a favorable outlook on YPF due to its divestment in mature areas, cost reduction, focus on shale, and the Argentina LNG project. At the same time, it highlighted Pampa for its record production in Rincón de Aranda and for its expansion into urea manufacturing. It also valued the monthly tariff updates, which improved the predictability of the regulated sectors.

Based on this reading, IEB maintained 40% of its local portfolio in Oil & Gas and 30% in regulated sectors, with positions in YPF, Pampa, Vista, Metrogas, Edenor, TGN, and Ecogas. Thus, it retained a strong exposure to the sectors that led in July.

YPF led the energy boost that supported the S&P Merval during July.

Sovereigns Under Pressure as Country Risk Ends Downward Streak

The fixed income market showed a mixed performance during July. While dollar-denominated sovereigns faced pressure, hard dollar provincial debt and peso-denominated instruments closed with positive yields.
Thus, the Global bonds fell by an average of 0.89%, with declines of 3.5% for the GD46, 2.2% for the AL41, and 1.7% for the GD35. In contrast, the AN29 gained 1.3% and the AO28 advanced 0.8%. Consequently, country risk rose by 2%, breaking the downward streak that had persisted since April and ending near 430 points, after having touched 402 units on July 10.
In this context, Justina Gedikian, senior analyst of Fixed Income at Cohen, warned that "country risk could not compress beyond the 370-400 basis points zone". She also stated that "the risk-return relationship does not reward stretching" as long as the 2027 electoral uncertainty remains unresolved, since the yield on long sovereigns does not compensate for the volatility.
Based on this analysis, Gedikian maintained a preference for the short segment. For conservative profiles, she highlighted the AO27, with an EAR of 3.9%, maturity within the current mandate, and monthly coupons of 6%. Additionally, to add sensitivity to a potential compression, she pointed to the AL30, with an EAR of 7.4%, which by the end of the term will have returned 52% of the original capital.
At the same time, she recommended diversifying into corporate bonds and longer-term sub-sovereigns, which allow capturing part of the improvement with less exposure to political noise. Among the former, she mentioned Pampa Energía, Tecpetrol, YPF, Pluspetrol, TGS, and Vista Energy, while within the provincial debt, she maintained a preference for Córdoba, Santa Fe, and CABA.
This strategy coincided with the monthly performance. In this sense, hard dollar provincial debt was the best class in dollars, with an average increase of 1.65%. In pesos, zero coupon CERs led with 1.93%, followed by TAMAR duals, with 1.65%, while dollar-linked instruments lost 1.15%.

Country risk rose again in July, despite credit improvement and good performance of provincial debt.
Oil, the Fed, and Tech Earnings Set the Global Tone

July was influenced by geopolitics, central banks, and the earnings season.
The escalation between the United States and Iran kept oil in the market spotlight. This led to Brent rising 20% during the month and rekindled inflation expectations. However, TSA Bursátil noted that crude started the last week nearly 9% below the previous close and then stabilized around $90.

In this context, the Federal Reserve maintained the rate at 3.50%-3.75%. The nine-to-three vote exposed a more restrictive stance, while Kevin Warsh reaffirmed the 2% inflation target and did not rule out further increases. Meanwhile, the Bank of England and the Bank of Japan kept their rates steady, although they left the door open for tightening their policies.

At the same time, Wall Street closed July in the red. The S&P 500 fell 1%, the Dow Jones dropped 0.5%, and the Nasdaq lost 4%, affected by doubts about the profitability of investments in artificial intelligence.

Regarding stocks, Alphabet fell more than 7% after raising its investment plan and reporting negative free cash flow, despite an 82% growth in Google Cloud. Meanwhile, Meta dropped nearly 9% after presenting weak guidance and a 91% contraction in its free cash flow.

In contrast, Microsoft recorded its best performance since 2008, with a rise of nearly 8% and almost $450 billion added to its market capitalization, driven by Azure and Copilot. According to TSA Bursátil, its revenues grew by 18%, while Amazon increased its revenue by 20%, supported by AWS, and advanced nearly 15%.

For its part, Apple gained almost 15% in July, its best month in three years, although it fell about 10% in the last week after presenting guidance below expectations. Thus, the mixed reaction showed that investors began to demand greater efficiency in technology spending. Nevertheless, TSA Bursátil highlighted that the expected year-on-year growth of S&P 500 earnings rose from 37.9% to 47.4%.

The escalation in the Middle East pushed oil prices and raised tensions in global markets.

What the market will watch in August

Looking ahead to the new month, attention will be focused on the legislative treatment of the reform of the BCRA's Organic Charter and the rest of the reform agenda announced by the Government, in a context where the electoral factor is starting to gain weight in investors' decisions.

On the financial front, the Treasury's ability to continue rolling over maturities in pesos without injecting excessive liquidity, the pace of reserve accumulation, and the evolution of the cost of financing in dollars appear as key variables to define the trajectory of country risk in the second half of the year.

On the external front, oil prices, the evolution of the conflict between the United States and Iran, and the signals from the Fed heading into September and the earnings season will continue to condition the climate for emerging assets.

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