BUENOS AIRES, Jan 7 (Reuters) - Argentine stocks slumped to their lowest in three and a half months on Monday, following Wall Street down, but bonds got a boost from institutional investors betting on lower interest rates in the United States.
The MerVal index .MERV of 42 leading stocks slumped 1.18 percent to 2,103.72 points. Volume on the broad market was moderate at $32.7 million. Of active issues, 31 advanced, 66 declined and nine were unchanged.
Buenos Aires-listed shares of Brazil's state oil company Petrobras (APBR.BA) slid 4.31 percent to 166.5 pesos per share, while another market heavyweight, steelmaker Tenaris TENA.BA, gave up 3.97 percent to 65.3 pesos per share.
"International market volatility continued, affecting the MerVal in a selective manner since issues most moved by institutional investors such as Brazil's Petrobras and Tenaris were the ones that absorbed the ups and downs on Wall Street," said Hernan Labrone, analyst with Fenix Financial Company in Buenos Aires.
Government bonds on the domestic market rose an average 0.4 percent, after falling earlier in the session, led by the peso-denominated Discount bond, which rose 2 percent in over-the-counter trade.
A rate cut in the United States would favor emerging debt as investors seek higher returns.
The peso currency closed mixed, as central bank intervention in the market offset large sales of dollars by agricultural exporters.
The peso weakened 0.08 percent in informal trade between foreign exchange houses as measured by Reuters, closing at 3.1725/3.1750 per U.S. dollar ARSB=. In formal interbank trade the peso strengthened by 0.08 percent to 3.1350/3.1375 per dollar ARS=RASL. (Reporting by Jorge Otaola; Translating by Fiona Ortiz; Editing by James Dalgleish)