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17.10.19 8 FOREIGN NEWS EURO zone inflation slowed in Sep- tember by more than previously esti- mated to its lowest pace in nearly three years, the European Union statistics agency said today. e figures will come as a new warn- ing on the state of the bloc's economy. Eurostat said prices in the 19-country currency area grew by 0.8% on the year, revising down its earlier estimate of a 0.9% rate. at also defied the market consen- sus of a 0.9% growth. In a separate release, Eurostat said to- day that the bloc's trade surplus with the rest of the world rose to €14.7 bil- lion in August, from €11.9 billion the previous year, as euro zone's imports dropped more than its declining ex- ports. e revised inflation reading marked a more pronounced slowdown from the 1% growth in August and was the lowest rate since November 2016 when prices grew by 0.6% in the bloc. e new drop is likely to raise new concerns on the state of the euro zone economy and could reignite the debate within the European Central Bank on how to pursue its goal of keeping in- flation below, but close to 2% over the medium term. e revision was due to low- er-than-expected inflation for indus- trial products, in a fresh worrying sign for the bloc's manufacturing sector which faces drops in output and a fall in confidence. Prices for industrial goods, exclud- ing energy, went up by a mere 0.2% on the year in September, Eurostat said, revising its earlier estimate of a 0.3% increase. Energy prices were confirmed falling by 1.8%, while inflation in the service sector, the largest in the bloc, rose by 1.5% in line with previous estimates. A narrower inflation indicator which strips out volatile energy and unpro- cessed food prices, and is monitored closely by the ECB for its policy deci- sions, rose to 1.2% in September from 1.1% in August, in line with Eurostat's earlier estimates released on October 1. Excluding energy, food, alcohol and tobacco, inflation grew 1.0% in Sep- tember, Eurostat said, confirming its previous figures. On the month, headline inflation grew 0.2% in the bloc, also in line with earlier estimates. Euro zone September inflation unexpectedly revised down to 0.8% Eurostat said consumer prices in the euro zone grew by 0.8% on the year, down from its earlier estimated of 0.9% INVESTORS are split on whether Argentine bonds can deliver stellar Ukraine-style returns ahead of a likely electoral win for Alberto Fernandez's market-antagonistic government on 27 October. Some sovereign bonds issued by Ar- gentina fell steeply to a face value in the mid-30s in August, after Presi- dent Mauricio Macri suffered a larg- er-than-expected defeat in a primary election (PASO). e fall mirrored moves in the Ukrain- ian bond market five years ago after Russia invaded the country. ose Ukrainian bonds went on to double in- vestors' money in a short period of time and some are hoping for a similar result in Argentina, with others sceptical of a repeat. Macri had been expected to lose nar- rowly before overturning the result on election day, as he had in 2015. e eventual large margin defeat seemingly ended this hope, spooking investors. "It is possible Macri pushes Fernan- dez to a second round, but if the PASO results were repeated then Fernandez would win in the first round outright," said Nachu Chockalingam, senior emerging market debt portfolio manag- er at Hermes Investment Management. Greg Mariasch, partner and portfolio manager at Pembroke Emerging Mar- kets, a BennBridge boutique, said the PASO "left the country in a political, economic and financial limbo". Markets collapsed and the currency depreciated significantly, resulting in a sharp rise in the value of its foreign exchange debt and pushing its debt-to- GDP ratio to almost 100%. With its $57bn IMF bailout having almost already been fully disbursed, Macri was forced into enacting capital controls and looking to restructure the government's debt payments. e face value of the bonds has recov- ered to trade in the low-to-mid-40s to- day, but they are still fully pricing in a bad default, according to Allianz Global Investors' Mike Riddell. e fixed income portfolio manager said the country already has the mantle for the worst default in modern history in terms of recovery value, with bond investors seeing a 70% haircut in 2001. As a result, Riddell said the team has been considering increasing its small position in Argentina recently, though have not moved yet. He referred to Ukraine's plight five years ago, when bonds traded at a cash price of around 40 at their nadir. Riddell, who then worked with M&G, recalled: "You could not have made a worse case for Ukraine bonds back then. ey had lost part of their country, their banking system had basically gone bust, the IMF would not bail them out and the bond market was 40% owned by one investor, which was itself experiencing massive outflows." Shortly after, the country announced a debt restructure, meaning anyone that had invested at 40 doubled their money within around ten months. "So, Argentina is getting very interest- ing. We are not adding yet, but when you see signs of massive distress then usually that is a buying opportunity, not a selling opportunity." Will Argentine bonds be the new Ukrainian- style success story? President Macri's defeat in recent primary elections affected Argentine sovereign bonds.