The Argentine stock markets crashed after the Conservative Argentine President Mauricio Macri suffered a shock defeat in primary elections on Sunday.
Macri said he would "reverse" the result of Sunday's primary, but acknowledged that a weaker peso triggered by the surge in support for Peronist opposition candidate Alberto Fernandez and his running mate former President Cristina Fernandez would fuel inflation.
"The unexpected gap in favor of the opposition candidate Alberto Fernandez is so wide that makes it very likely for Frente Todos to win the election in October".
Bank of America Merrill Lynch analysts said the scale of the Fernandez win was much more extreme than their "bear case" scenario.
"This is an election where Argentina has to determine whether it continues on a path of transformation, of deepening democracy, of insertion into the world, of improvement and development - or returns to an authoritarian populist model that has failed in all places where it has been implemented", he said.
Argentine stock and bond prices were expected to slide when financial markets opened on Monday because Fernandez's lead far exceeded the margin of 2-8 percent forecast in recent opinion polls. "The markets are giving warning that the government has put itself in a position it can not respond to", Fernandez told Radio 10.
Investors see the Fernandez-Kirchner ticket as a riskier prospect than sticking with the business-friendly incumbent.
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Ever since taking office, Macri has blamed Argentina's economic woes on the policies enacted by three successive Kirchner governments - Cristina Kirchner's 2007-15 time in office was preceded by a single term for her late husband Nestor. She feuded with the country's key farm sector over export taxes and presided over a multi-year standoff with bondholders that kept Argentina locked out of the global capital markets.
On Sunday, Macri told supporters the primary vote was a "bad election" for his coalition ahead of the official results.
"With a renewed focus on sovereign default risks, bonds, equities and the peso will come under severe pressure in the coming days".
An outright election in the first round of the presidential vote demands at least 45 percent of the votes or 40 percent plus a greater than 10-point advantage over the closest rival.
Macri has struggled to maintain voter support in the face of increased poverty and unemployment.
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