By Walter Bianchi and Gabriel Stargardter
BUENOS AIRES (Reuters) - Local Argentine markets on Thursday reacted positively to signs that political leaders from both parties are determined to control an economic crisis sparked by a shock primary-election result that wiped out around a quarter of the peso's value
The peso began to fall after center-left presidential candidate Alberto Fernandez, running alongside former leftist President Cristina Fernandez de Kirchner, unexpectedly trounced center-right President Mauricio Macri, whose austerity measures turned off voters in Sunday's primary vote.
There had been few signs of rapprochement between the two in the immediate aftermath of the vote but as markets continued to tumble on Wednesday, Macri and Fernandez spoke, agreeing to try to calm rampant volatility.
Fernandez, the clear favorite to win the October presidential election, later said his economic plans did not contemplate a debt default. A 2002 default triggered a massive economic collapse in Argentina, Latin America's No. 3 economy.
"The conversation was cordial and didn't lead to any concrete announcements, but at least for the first time it showed a desire for both sides to cooperate," broker SBS said in a note after the talks. "These gestures will probably serve to calm the spirits of investors but we'll have to see if they are enough or if more specific measures are needed."
The peso had risen as much as 7% earlier on Thursday, but then pared gains to trade around 5% higher at 57.5 pesos per dollar, according to traders, who said the chance to snap up rock-bottom pesos had contributed to its jump.
Argentina's Merval stock index was up more than 5% on Thursday afternoon.
Fernandez' strong showing led investors to sell Argentine assets, fearing a return to leftist policies and the end of free-market economic and structural reforms in a country long-blighted by weak growth, defaults and sky-high inflation.
Argentina's latest lurch back into crisis comes amid widespread volatility and fears of a global recession sparked by the trade war between China and the United States, and protests in Hong Kong.
Speaking earlier on Thursday in a radio interview, Fernandez said he was comfortable with an exchange rate of 60 pesos to the dollar: "The dollar at 60 seems fine to me."
(GRAPHIC - Peso argentino - Riesgo pais: https://fingfx.thomsonreuters.com/gfx/editorcharts/MERCADOS-ARGENTINA-CIERRE/0H001QEQK7XN/eikon.png)
Macri announced a series of welfare subsidies and tax cuts for lower-income workers on Wednesday, in an awkward about-turn for a president who took office in 2015 vowing to slash public subsidies and to correct what he called years of leftist economic mismanagement.
Macri promised to raise the minimum wage, temporarily freeze gasoline prices and increase the income tax bracket floor by 20%. The new measures, which would cost about $678 million, would allow a tax cut for two million workers worth some 2,000 pesos ($33) per month per person, the government said.
Education Minister Alejandro Finocchiaro said at a press conference on Thursday that the government was studying new measures to help people with inflation-linked mortgages.
The central bank sold $248 million from its reserves on Wednesday, bringing its total sales in reserve dollars to $503 million this week. The bank has about $66 billion in reserves, of which about $20 billion are free resources that can be used to pay debt and stabilize the peso, according to an Argentine government official.
Debt payments for the remainder of 2019 are estimated at between $5 billion to $10 billion, depending on Argentina's ability to roll over domestic Treasury bills, leaving a thin margin to intervene in the foreign exchange market.
There is an additional $27 billion in maturities in 2020, according to government data.
Argentina's century bond traded in thin volumes on Thursday, with prices just above 50 cents on the dollar or some 4 points above Wednesday's close. The January 2028 bond last traded Wednesday according to MarketAxess data, at around 46 dents on the dollar.