BUENOS AIRES, Dec 18 (Reuters) - Argentine stocks sagged on Thursday after 11 consecutive gaining sessions, hit by weakness on Wall Street and lower crude prices, which hurt heavyweight oil industry stocks.
But the country's sovereign bonds rose for a second straight day in local trade, as institutional investors retook positions, a phenomenon seen in emerging markets after an aggressive U.S. interest rate cut on Tuesday.
The benchmark MerVal index .MERV ended 2.74 percent lower at 1,116.43 points. Volume was low at $16 million. Among active issues, 13 advanced, 39 declined and 17 were unchanged.
Tenaris (TENA.BA), which makes steel pipes for the oil industry and is weighted at 20 percent of the MerVal, slumped 3.3 percent to 37.6 pesos per share.
"The MerVal was already on its way down because of the new lows in crude prices ... and once the U.S. market started falling faster there was a generalized correction in the MerVal," said Marcelo Paccione, analyst with ConsulCapital consulting firm.
U.S. crude oil futures fell more than 9 percent on Thursday, bringing down energy sector prices and the main stock indexes in the United States.
On the local bond market, the dollar-denominated 2033 Discount bond ARDISCD=RASL, one of the most liquid issues, rose 3 percent to an ask price of 30.9, while the Boden 2012, also in dollars, rose 1 percent ARBODEN12D=RASL to an ask price of 25.15.
Bond prices had been rising strongly in the early afternoon but moderated gains somewhat after ratings agency Fitch lowered its rating on peso-denominated bonds to 'B-' from 'B' citing the challenges ahead in Argentina's fiscal and external financing requirements.
"There are attractive prices on some bonds and that's why there are buying currents, but there are still doubts about the government's payment capacity and that plays against the market," said one trader.
Argentina's isolation from international credit markets and the global credit crunch have generated concerns over the country's ability to face mounting debt obligations next year.
In the foreign exchange market, the peso ARSB= ended flat to slightly weaker.
In formal interbank trade the peso closed at 3.405/3.4075 per dollar ARS=RASL, unchanged from a day earlier.
In informal trade between foreign exchange houses, as measured by Reuters, the peso weakened by 0.22 percent to 3.4700/3.4725 per dollar ARSB=. (Reporting by Walter Bianchi and Jorge Otaola, writing by Fiona Ortiz; editing by Gary Crosse)