UPDATE 3-Argentine markets close down sharply after bad week

viernes 24 de octubre de 2008 18:26 ARST

(Updates with closing stock prices, adds quote, funds returning to market on Monday)

BUENOS AIRES Oct 24 (Reuters) - Argentina's peso currency dropped to its weakest level in six years against the dollar on Friday, stocks sagged to a 4-1/2-year low and bonds slumped so low that they priced in default expectations after a relentless week of bad sentiment on local markets.

Fears of a global recession, as well as a crisis in confidence over the Argentine government's economic policies, hammered the country's markets all week after the government announced a state takeover of the private pension system.

"What happened with government debt in the last week reinforces the idea that the market is pricing in a default," consulting firm Delphos Investment said in a report issued in Buenos Aires.

The peso weakened 0.77 percent in formal interbank trade to 3.2775/3.2800 per dollar ARS=RASL, its lowest level since the January 2002 devaluation.

In informal trade between foreign exchange houses, as measured by Reuters ARSB=, the currency sank 2.38 percent to 3.4250/3.4350 per dollar, the lowest since December 2002.

The MerVal index of leading stocks .MERV closed down 7.61 percent at 890.27 points, its lowest since mid-2004, and down almost 27 percent during the week. Volume was heavy at $38 million. Of 64 active issues, not one advanced.

Molinos food company launched a repurchase offer for 20.7 percent of its market capital, offering to buy 51.8 million shares at 9 pesos per share MOL.BA after the Argentine securities regulator relaxed restrictions on companies buying back shares.

Molinos was trading at 7.7 pesos per share.   Continuación...