Mexican stocks gain on Friday, while peso sank to a one-month low, hurt by concerns tax reforms passed last weekend will not be enough to stave off a downgrade of the country's debt. The IPC stock index closed up 0.45 percent to 29,868.62 after US employment figures offered a few glimmers of hope for Mexico's top trading partner. The IPC gained 4.3 percent this week.
Last weekend, Mexican lawmakers finalised a watered-down version of President Felipe Calderon's fiscal reform package, which aims to raise taxes and help reduce Mexico's dependence on its waning oil industry. Many analysts say the reforms are not deep enough to satisfy Wall Street ratings agencies that threaten to downgrade Mexico's debt unless the government widens its tax base.
"The interpretation is that the revenue law could result in a downgrade, and foreigners are deciding to put their money elsewhere while the uncertainty continues," said Juan Jose Resendiz, an analyst at Arka brokerage firm in Mexico City. Standard & Poor's and Fitch Ratings, which both have assigned Mexico a negative outlook, have said they will wait to issue any decisions until lawmakers approve the spending side of the budget, expected later this month.
On Friday, data showed the US unemployment rate jumped to a higher than expected 10.2 percent, the worst in more than 26 years. The data initially spurred losses in US and Mexican equities, but closer inspection of the report showed payroll losses kept declining.
"The market is looking at this as a sign that US unemployment could be nearing a ceiling," Resendiz said. Mexico is counting on a rebound in US consumer demand for its exports to help pull out of the worst local recession since the 1930s. Shares in miner Grupo Mexico rose 2.04 percent to 29.01 pesos cement maker Cemex gained 1.65 percent to 14.78 pesos.
The peso lost 0.97 percent to 13.415 per US dollar, closing out its worst week in a month and a half with around a 1.6 percent loss. The government's 10-year peso bond bid down 5 basis points to 8.01 percent as falling yields on US Treasuries made higher-yielding debt more attractive to yield-hungry investors.