Mexico's benchmark IPC stock index closed up 0.22 percent at 20,325.39 percent, breaking a nine session losing streak on Friday meanwhile peso firmed as fresh US government aid for American banks eased some investor concern about stress in the financial sector, pushing some investors back into emerging market assets.
The optimism offset concerns about growth after Mexico's central bank slashed borrowing costs in a bid to prevent the economy from tipping into recession. Hope US government aid would help the economy of Mexico's main trading partner was offset by the worries expressed by Mexico's central bank about growth.
"People didn't take the rate cut very well, the most optimistic outlook for growth is zero percent," said Gerardo Sienra, a stock trader at Actinver brokerage in Mexico City. Shares in top retailer Wal-Mart de Mexico sank 1.67 percent to 32.35 pesos. Offsetting losses, shares in Cemex, the top US cement supplier, gained 2.51 percent to 13.50 pesos, helped by expectations the company will benefit from Obama's plans to ramp up infrastructure spending. Cemex shares on Wall Street rose 2.85 percent to 9.74.
The peso currency firmed 0.54 percent to 13.905 per dollar at the central bank's final reference. News that Bank of America received $20 billion in new government capital and that the government would help troubled banks eased worries about the credit crisis and boosted currencies like the peso and the Brazil's real.
Investors were also looking forward to US President-elect Barack Obama taking power next week and pushing for a swift approval by Congress of a $825 billion stimulus package that could help pull the United States out of recession.
"Obama coming into power and the expectation that he will ask Congress for more money is helping the market," said a currency trader in Mexico City. Any boost for the US economy bodes well for Mexico, which sends around 80 percent of its exports to its northern neighbour.
Mexico's central bank cut the benchmark overnight rate by half a percentage point to 7.75 percent and hinted at more cuts as the US economic recession slams Mexican exports and threatens to shrink the economy. The cut had little impact on the currency or bond market as the move was in-line with market expectations, traders said.