The IPC stock index closed up 0.22 percent at 19,348.81, rebounding from steep early losses as investors scoured the beaten-down market for bargains, traders said. Britain announced it had slid into recession and bellwether General Electric warned of an "extremely difficult" 2009, feeding investors concerns that the global economic downturn is deepening.
In the equities market, some traders said there were hopes the new US administration would soon move to recapitalize troubled banks, which could help spur more lending and a quicker economic recovery. Battered shares in No 3 retailer Commercial Mexicana rose 2.26 percent to 3.17 pesos after it said it reached a deal with all its key creditors to hold off on existing and new lawsuits as it restructures more than $2 billion in debt.
Offsetting gains, shares in top retailer Wal-Mart de Mexico shed 1.83 percent to 30.10 pesos. Retailers group ANTAD warned this week that same-store sales at department stores and supermarkets are expected to decline 4 percent in 2009, their worst performance in over a decade. In debt trading, the government's benchmark 10-year peso bond fell 0.199 of a point in price, pushing its yield up 3 basis points to 7.37 percent.
Mexico's peso weakened sharply on Friday as grim earnings outlooks by US firms fuelled concerns about the local impact of the recession in the United States, Mexico's top trading partner. The peso lost 0.5 percent to 14.035 per dollar at the central bank's close.
"The peso is very vulnerable. Once again risk aversion held sway in global markets," said a currency trader in Mexico City. The peso lost 21 percent against the dollar last year as worries mounted that the US slump would drag Mexico into recession and investors dumped emerging market assets amid the panic of the global credit crisis.
The currency has lost nearly 1.5 percent more so far this year. Analysts say the peso will remain under pressure as demand for exports in the United States falls and the central bank further cuts borrowing costs in a bid to prop up the flagging economy. Last Friday, Mexico's central bank cut it key interest rate for the first time in nearly three years and policy-makers are expected to lower borrowing costs further this year.