(Adds bond prices and debt spreads, updates throughout)
BUENOS AIRES, Oct 14 (Reuters) - Argentine stocks .MERV rallied 13.9 percent on Tuesday, mirroring the global market rally that took place on Monday when the Buenos Aires stock exchange was closed for a national holiday.
The benchmark MerVal index was up at 1,384.71 points in midday trade, erasing more than half of the 24 percent loss it racked up in the last seven sessions.
"The MerVal reacted according to the more relaxed situation of investors following the decisions of the different worldwide institutions," said Hernan Labrone, an analyst at the Fenix Compania Financiera brokerage.
Globally, stocks rose for a second day Tuesday after Washington joined European plans to pump billions of dollars into banks in a concerted effort to turn back a worldwide financial crisis.
Argentina's peso, which slumped last week as savers rushed for safe-haven dollars, also recovered some lost ground.
In informal trade between foreign exchange houses, as tracked by Reuters, the peso strengthened 3.3 percent to 3.25/3.26 per U.S. dollar ARSB=.
In formal trade between banks ARS=RASL, where the central bank intervenes directly, the peso was trading 0.54 percent firmer at 3.2025/3.2050 per dollar.
On Monday, when Argentine markets were closed, global stocks posted record single-day gains, bouncing off five-year lows after governments in Europe adopted sweeping financial measures to quell the global credit crisis and avert a deep recession.
Argentine bonds traded locally were up 4.6 percent on average in over-the-counter trade, buoyed by gains in the 2033 dollar-denominated Discount paper ARDISCD=RASL, which rose 9.3 percent, according to the ask price.
Local debt prices had sunk nearly 23 percent in the first 10 days of October amid global market turmoil and despite the government's announcements that it planned to repay its defaulted debt to the Paris Club and might launch a swap for "holdout" creditors who rejected a 2005 restructuring.
Argentine debt spreads against similar U.S. Treasuries shrank by 124 basis points to 1,234, according to the JPMorgan emerging markets bond index 11EMJ. (Reporting by Jorge Otaola and Walter Bianchi; Writing by Helen Popper and Hilary Burke; Editing by Leslie Adler)