Tuesday, January 22, 2008

Even The Mexican Markets Are Getting Beaten Up


Mexican markets plunge on U.S. recession fears
REUTERS
1:20 p.m. January 21, 2008
MEXICO CITY – Mexican stocks suffered their heaviest fall in 11 months Monday and the peso tumbled to its weakest since September on growing concerns the U.S. economy is slipping into recession.
The benchmark IPC stock index plunged 5.35 percent to 25,284.88 points. With the decline, the index was down 14 percent for the year, erasing all its gains from 2007, when stocks rose 11 percent.
The peso fell 0.85 percent to 11.0110 per dollar at the central bank close.
“It looks like panic selling,” said Francisco Diez, director of emerging markets trading at RBC Capital in Toronto.
Investors dumped stocks and sold emerging market currencies across the world on concerns that a White House plan to stimulate the U.S. economy would not be enough to avoid a recession.
Mexico sends about 80 percent of its exports to the United States.
“Market consensus is that a (U.S.) recession is imminent,” said Rogelio Gallegos, a fund manager at Actinver brokerage in Mexico City.
At the same time, Mexican bonds surged on growing bets that the U.S. Federal Reserve would cut rates aggressively in coming months to keep the U.S. economy growing.
“People think there could be several rate cuts,” said a bond trader in Mexico City.
The benchmark 10-year government peso bond rose 0.483 of a point in price to bid 101.059. That pushed its yield down 8 basis points to 7.82 percent, its lowest level since October.
In stock trading, dominant cell phone operator America Movil dragged hardest on the index, falling 6.95 percent to 26.66 pesos.
Top retailer Wal-Mart de Mexico lost 5.93 percent to 34.90 pesos.
Copper miner Grupo Mexico plunged 7.67 percent to 54.17 pesos as copper prices fell and the country's miners union said a court ruled that the company cannot fire striking workers at its Cananea copper mine.

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