Mexican stocks dip

Mexico's stocks fell on Friday and the peso weakened sharply after the US unemployment rate hit its highest rate in 3-1/2 years, stoking fears about the health of the economy in Mexico's main trading partner. The benchmark IPC stock index dropped 1.82 percent to 31,149.06 points.
The US Labour Department said the country's unemployment rate rose in May to 5.5 percent, the highest rate since October 2004, and up from 5 percent in April - the sharpest month-on-month rise in 22 years. "The fact that the labour market is more depressed in sectors like construction and manufacturing hits us (in Mexico) to a greater degree, in construction on the side of remittances and in manufacturing on the side of exports," said Alejandro Martinez, a currency and debt analyst at HSBC in Mexico City.
In local stock trading, traders said US crude's dramatic $11 jump fuelled further concerns about inflation and a reduction of spending power of American consumers. Shares of America Movil, the biggest cell phone operator in Latin America, shed 3.28 percent to 28.58 pesos while its New York traded stock lost 3.87 percent to $55.14.
Top retailer Wal-Mart de Mexico fell 1.62 percent to 44.98 pesos. Shares of Cemex, the biggest US cement supplier, slipped 2.51 percent to 29.08 pesos while its New York traded shares dropped 3.18 percent to $28.02. In debt trading, long-term bond yields surged to 19-month highs as investors bet Mexican inflation data due Monday could come out higher than expected and raise chances for a rate hike by the nation's central bank.
The 48-hour peso contract weakened 0.62 percent at the central bank's final 1:30 pm (1830 GMT) reference to 10.375, then paring some losses to trade around 10.36 pesos. Many of the millions of Mexican immigrants living in the United States work in construction and the money sent home by immigrants is one of Mexico's top sources of foreign currency.
Mexico's manufacturing base is closely tied to industry in the United States, the destination for more than 80 percent of Mexican exports. In debt trading, the government's benchmark 10-year peso plunged 0.508 of a point in price to bid 95.754, pushing its yield up 8 basis points to 8.40 percent, the highest since October 2006.