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 Business News | January 2008 
Surprise US Rate Cut Boosts Mexico Markets
 Reuters
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Mexico City - Mexico's peso and stocks surged on Tuesday after the U.S. Federal Reserve slashed interest rates by three quarters of a percentage point in a bid to head off a recession in the United States.
The peso MEX01 firmed 0.83 percent to 10.9205 per dollar. The benchmark IPC stock index .MXX jumped 5.09 percent to 26,571 points.
In debt trading, the yield on Mexico's 10-year peso bond slid 11 basis points lower to 7.71 percent.
The Fed's surprise rate cut to 3.5 percent, its biggest move in more than 23 years, was an emergency bid to lend support to a U.S. economy some fear is on the verge of recession.
Mexico's comparable overnight rate stands at 7.50 percent, offering an attractive spread to yield-hungry international investors.
"It will be enough to stop bleeding over the short term, a week or two weeks," said Francisco Diez, director of emerging markets trading at RBC Capital in Toronto, referring to the U.S. rate cut.
But Diez warned that Latin American markets will remain sensitive to signs of illness in the U.S. economy.
Experts say Mexico can weather a recession in the United States, keeping growth this year around 3 percent thanks to ambitious government investment in infrastructure, increased consumer credit and high oil prices. Mexico sends more than 80 percent of its exports to the United States.
But markets around the world have tanked in recent sessions on fears a U.S. recession could drag other economies around the world down with it.
On Monday, Mexico's IPC index dropped more than 5 percent.
In stock trading, America Movil (AMXL.MX), the region's leading cell phone operator, gained 7.65 percent to 28.70 pesos.(at)(Reporting by Noel Randewich and Cyntia Barrera; Editing by Jonathan Oatis) |
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