Mexico's stocks dropped on Friday and the peso was little changed after data showed US consumer confidence fell in early August, suggesting Mexican exports may face a rocky road to recovery. Mexico sends around 80 percent of exports to its northern neighbour and needs a rebound in US consumer demand to exit deep recession.
Mexico's benchmark IPC stock index dropped 1.07 percent to 27,855.43 while the peso was at 12.854 per dollar, 0.05 percent firmer. Mexican stocks are up more than 19 percent since July 7 and more than 64 percent since their March bottom. Some investors worry the rebound in global markets has outpaced the apparent strength of the real economic recovery.
HSBC raised its rating on Mexican equities to "overweight," saying the country was its top Latin American pick because of better prospects for economic growth in the United States. Mexico's peso outperformed other emerging market assets since last week as it benefits from perceptions of a US recovery.
Data showed that currency speculators placed the most bets yet this year that the peso would gain against the dollar in the week ending August 4. The tendency continued on Friday as the peso weakened far less than currencies like Brazil's real.
Others are concerned that dismal prospects for crucial tax reforms in the coming months will increase chances that Wall Street agencies could downgrade Mexico's debt, undermining the currency. In equities trading, shares in cement giant Cemex, which counts the US as one of its top markets, lost 4.28 percent to 13.86 pesos, despite its announcement that it had reached a refinancing deal with creditor.
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