May 23, 2008 / 9:17 PM / 12 years ago

Argentine stocks, bonds, peso slide on farm conflict

(Updates with closing prices, adds quote)

BUENOS AIRES, May 23 (Reuters) - Argentine stocks fell on Friday after six sessions of gains, and bonds also slid after a meeting between the government and farm leaders failed to end a two-month dispute over grains export taxes, raising concerns of a prolonged political conflict.

Demand was also high for dollars as investors sought safety in foreign currency, but the central bank sold greenbacks on the foreign exchange market to prevent the peso from losing ground.

The benchmark MerVal index .MERV shed 0.57 percent to 2,235.33 points shares as banking stocks sagged, hurt by a fall in government bond prices also affected by developments in the farm talks.

Shares of Grupo Financiero Galicia GFG.BA, which controls Argentina’s biggest bank, slumped 4.1 percent to 1.87 pesos per share.

Local bank shares are usually hit in Argentina when bond prices fall, because they are obligated to hold government debt.

“With the end of the farmer conflict looking unpredictable, investors are moving out of their positions as uncertainty returns to the markets,” said Leopoldo Olivari, a trader at Bacqui brokerage.

On the broad market volume was weak at $16.5 million. Of active issues 26 advanced, 65 declined and 18 were unchanged.

Government bonds traded locally gave up 1.5 percent on average. Both the dollar-denominated Disc bond and the Bonar 2013 fell 1.5 percent.

Farmers and the government were not able to solve their differences over a soy exports tax, which deepened worries of political uncertainty among investors. A drawn-out conflict with the agricultural sector has seen President Cristina Fernandez’s popularity ratings slide.

Farmers have staged two strikes since March over a tax hike on soy exports. They are calling for a change in the tax, and the meeting between farm leaders and the government was the first after farmers called off their second strike earlier this week to renew negotiations.

Argentina is one of the world’s top suppliers of soybeans, corn, wheat and beef.

On the foreign exchange market, the peso currency weakened by 0.08 percent to 3.2225/3.2250 per U.S. dollar ARSB= in informal trade between foreign exchange houses, as measured by Reuters. In formal interbank trade the peso nudged up 0.08 percent to 3.1325/3.1350 per dollar ARS=RASL. (Reporting by Walter Bianchi, Writing by Fiona Ortiz; editing by Leslie Adler)

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