Mexican stocks slip

Mexican stocks fell on Friday as investors around the world cut exposure to risky assets and high-yield currencies amid worries about the strength of the global economic recovery. The IPC stock index closed down 0.49 percent at 30,666.51 while the peso slipped only 0.03 percent to 13.072 per US dollar, despite broad gains in the US currency.
With support coming from speculation Mexico may be able to skirt a downgrade of its debt from Wall Street ratings agencies. European Central Bank President Jean-Claude Trichet said Friday it was premature to declare the financial crisis over, and he warned that banks risk becoming addicted to the cheap money from emergency government stimulus programs and must be prepared for its withdrawal.
"Trichet's comments feed the worry a bit that the recovery could be a bit limited if they start pulling out stimulus," said Carlos Alonso, a trader at Interacciones brokerage firm in Mexico City. Also hurting assets in Mexico, which sends about 80 percent of its exports to the United States, US homebuilder D.R. Horton Inc posted a fourth-quarter loss that was wider than expected and said market conditions were "still challenging."
"We have more US housing data next week, and Horton's report suggests the numbers could be weak and this correction could continue," Alonso said. Doubts about the strength of the US economic recovery could undermine confidence in Mexico's own recovery prospects.
Speaking in New York on Thursday, Mexican Finance Minister Agustin Carstens addressed fears of a ratings downgrade, saying the country's finances are on a "sustainable path" while ongoing infrastructure reforms will support economic growth.
"We still believe a downgrade can be avoided for the time being," wrote HSBC analyst Clyde Wardle in a note to clients. The peso has lagged far behind the rally in emerging markets this year because of worries that US ratings agencies could downgrade Mexico's debt.
Standard & Poor's and Fitch Ratings have threatened to cut Mexico's debt rating unless it reduces its dependence on taxing declining oil output. Lawmakers on Tuesday passed a 2010 budget that included watered-down versions of tax hikes proposed by President Felipe Calderon. Market opinions are divided on whether the reforms will be enough to avoid a downgrade.
"The budget left a bad taste in the mouth," said a trader in Mexico City, who said the peso would likely weaken toward its 100 day-moving average around 13.25 in the coming sessions. In stock trading, shares in miner Grupo Mexico lost 2.13 percent to 30.39 pesos and America Movil, Latin America's biggest cell phone provider, lost 0.77 percent to 30.74 pesos.