(Updates with early moves in Argentine markets)
By Marc Jones
LONDON, Dec 11 (Reuters) -
Argentina's financial markets made a groggy start to the Javier Milei era on Monday as they waited impatiently for the new president to launch into his promised economic shock therapy with a huge devaluation of the peso.
The radical economist took office on Sunday with a warning in his inaugural speech that he had no alternative to a sharp, painful fiscal shock to fix the country's "titanic" challenges.
Milei has promised deep cuts to public spending but his task looks daunting with hyperinflation and recession looming and the government's reserves thoroughly depleted.
The 53-year-old's speech on Sunday had been light on detail, but he reiterated there would be a fiscal adjustment equivalent to 5% of GDP through cuts that would fall on "the state and not the private sector".
Investors are now waiting for the plan to be fleshed out and to see how quickly he moves. A government spokesman said key measures would be laid out on Tuesday by new Economy Minister Luis Caputo.
That seemed to irk the stock markets. The country's oil company YPF erased its early gains to fall 3.4%.
Banks such as Grupo Supervielle , Banco Macro
, Banco Bbva Argentina and Grupo Financiero Galicia shed between 2.9% and 5.3% while MSCI's Global X Argentina ETF dropped 1.6%.
Argentina's international dollar-denominated bonds, which have surged some 25% since Milei won the presidency last month, ticked lower too but focus was largely on the peso and when and how large its widely-expected devaluation will be.
BlueBay Asset Management's Graham Stock said that after a string of recent local press reports that he expected it to be slashed to around 650 to the dollar from around 360 now, while analysts at Morgan Stanley predicted 700 per dollar.
The speech "yesterday was for show but now he (Milei) needs to get down to the hard graft of governing," Stock said. "We are cautious constructive from here," he added. "But let's see what the policy steps are."
The government's measures will involve a major cut to fiscal outlays but also some increased social spending, presidential spokesman Manuel Adorni said at a press conference, reflecting the challenge Milei faces in avoiding social unrest.
DEBT BOMB
With the big devaluation decision still pending, the central bank weakened the peso's official rate a modest 0.55% to leave it at 366.10 per dollar.
One way locals and internationals were able to trade the peso over the weekend was in the 24-hour cryptocurrency markets, albeit in tiny volumes compared to the traditional FX ones.
The peso was last at 42,025 per bitcoin, according to crypto exchange Binance's website, although that was off a low of 44,862 seen on Sunday.
Tether - another cryptocurrency pegged to the U.S. dollar - was trading at 1,019.7 pesos compared to around 980 after Milei's election win three weeks ago.
In his speech, Milei had highlighted the need to address his country's ticking "debt bomb".
Serial defaulter Argentina owes over $4 billion to the International Monetary Fund and to private sector creditors by the end of January and $90 billion and $25 billion in local and foreign currency debt payments respectively for 2024 as a whole, JPMorgan calculates.
U.S. and European-listed shares, known as "depository receipts", were mostly higher, with YPF up 2.3% in U.S. premarket trading and up 1.2% in Europe
"The problem is that most people who voted for Milei didn't vote for him because of the economic transformation, but because they hated the other guys," said Viktor Szabo, an emerging market portfolio manager at Abrdn.
"You can gain time from the market if you make the right noises but you have a population that over the last 50 years has gotten used to Peronism, so it will be hard to explain to them that there is hardship to come."
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(Additional reporting by Bansari Kamdar, Nicolas Misculin, Rodrigo Campos and Karin Strohecker; editing by Alexander Smith, Jason Neely and Nick Macfie)
((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net Twitter @marcjonesrtrs))
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