RemittancesGateway.org

Mexico's Stocks Open Lower As US Job Losses Weigh; IPC Down 1.9%

Tuesday, 09 February 2010 16:00

Source: Wall Street Journal
By: Ken Parks

Mexico's stocks extended their losses Friday as economic data pointing to further weakness in the U.S. labor market weighed on investor sentiment.

Mexico's benchmark IPC index of leading issues was down 1.9% at 30028.31 points around 10:10 a.m. EST. Volume was 20.8 million shares, worth 583.4 million pesos ($44.3 million).

The IPC fell 2.2% on Thursday, its biggest one day drop in two weeks, as global equity markets tumbled on growing fears that heavily indebted euro-zone countries like Greece and Portugal might have trouble servicing their debts.

BBVA Bancomer technical analysts said in a morning note to clients that losses in international markets will continue to weigh on the IPC, which could fall to levels around 28500 points as part a short-term downtrend.

The U.S. Labor Department said Friday that nonfarm payrolls fell by 20,000 in January, surprising economists who had expected employers to add jobs. December figures were revised lower to show the U.S. economy shed 150,000 jobs that month, instead of the 85,000 job losses originally reported.

Mexico is heavily dependent on the U.S. economy, which buys about 80% of its exports and employs millions of Mexican workers who sent home just over $21 billion in remittances last year.

Mexico's economy is on the mend following its deepest recession since the 1995 peso crisis, with gross domestic product expected to have shrunk nearly 7% in 2009 due to a drop in exports to the U.S.

Mexico's Deputy Finance Minister Alejandro Werner told Dow Jones Newswires on Friday that recent economic data justify market expectations that growth in GDP this year will be stronger than the 3% forecast by the government.

The average forecast of 28 analysts and economists surveyed last month by the Bank of Mexico put GDP growth at 3.3% this year and 3.5% in 2011, up from 3.1% and 3.2% in the central bank's December survey.

Among local issues, the L shares of wireless carrier America Movil (AMX), Mexico's largest publicly traded firm by market capitalization, were down 2.1% at MXN28.55, while the CPO shares of cement maker Cemex (CX) were off 0.2% at MXN11.81.

The O shares of banking group Banorte (GFNORTE.MX) were down 2% at MXN44.61, the B shares of copper miner Grupo Mexico (GMEXICO.MX) were off 1.4% at MXN26.65, and the V shares of Wal-Mart de Mexico (WALMEX.MX) were 2.3% lower at MXN55.50.

The yield on 20-year bonds maturing in 2024 was up one basis point at 8.11%. Yields move inversely to bond prices.

Losses on local markets and investor aversion to emerging markets sent the peso sliding against the U.S. dollar. The local currency was quoted in Mexico City trading at MXN13.1795 to the dollar, compared with MXN13.1170 at Thursday's close.