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UPDATE 2-Argentine markets hold steady as anti-government protesters take to the streets

Adam Jourdan and Jorge Otaola

the streets@ (Adds details on bonds, color from the protest)

BUENOS AIRES, Sept 4 (Reuters) - Argentine markets held steady on Wednesday, even as thousands of protesters took to the streets to demonstrate against the government of President Mauricio Macri and a darkening economic outlook in the recession-hit South American country.

The peso edged up and bonds rose after newly imposed capital controls helped stabilize haywire markets that have plumbed record lows since Macri was trounced in a primary election last month, dashing his hopes of re-election in October.

On the streets of Buenos Aires, protesters marched brandishing banners slamming Macri's economic austerity, rising poverty, and the International Monetary Fund (IMF), which agreed to a $57 billion credit facility with the country last year.

"Salary increase now! The debt is with the people, not with the IMF," one of the protest organizers wrote.

Argentine economic growth has stalled sharply since last year, while inflation is far outstripping salaries, leading to a sharp uptick in poverty, official data shows. That trend was one of the key reasons for Macri's larger-than-expected electoral defeat to the left-leaning Peronist Alberto Fernandez.

The peso currency was up slightly in early trading at 55.9 per U.S. dollar, after rising sharply on Tuesday as Wall Street cheered Macri's capital controls aimed at protecting the beleaguered markets.

The black market peso, traded in unofficial channels, also rose. Argentine over-the-counter bonds were up an average 3.5% on Wednesday, traders said, while the country's risk index fell.

The steadier markets come after the primary election result sparked a market crash which saw the peso lose 26% of its value against the dollar in August. The country risk index soared and bond prices sank to record lows.

In response Macri, who came to power in 2015 as a free-market champion and critic of interventionist policy, has rolled out plans to push back payments on around $100 billion of debt and imposed capital controls to protect the peso.

While markets have stabilized, the country's economic outlook has darkened. A central bank poll of economists hiked its inflation forecast for the year to 55% on Tuesday, and cut its outlook for the economy which it now expected to shrink 2.5%.

The protesters in Buenos Aires on Wednesday demonstrated against rising food prices and thin salaries under Macri, during whose tenure millions of people have dropped below the poverty line as economic turmoil has worsened.

South America's second largest economy has been in a biting recession since last year when a debt crisis hammered the peso currency and drove inflation up to 50%. (Reporting by Adam Jourdan and Jorge Otaola Editing by Chizu Nomiyama, David Gregorio and Tom Brown)