Mexico peso, stocks surge 3 pct as US votes

(Recasts; adds trader's quote)

MEXICO CITY, Nov 4 (Reuters) - Mexico's peso surged and stocks jumped on Tuesday amid a global rally as the United States held presidential elections and investors bet on aggressive interest rate cuts in Europe later this week.

The peso MXN= MEX01 firmed 3.13 percent to 12.465 per dollar while the benchmark IPC index .MXX jumped 3.05 percent to 21,240.

A victory by U.S. presidential Democratic candidate Barack Obama is widely anticipated by the markets and he is seen having an easier time pushing his agenda to fight the credit crisis through a Democratic-controlled Congress.

The Reserve Bank of Australia's decision to cut interest rates more than expected also bolstered investor confidence. The European Central Bank and the Bank of England are seen slashing borrowing costs later in the week.

"This will help activate the global economy and it gives the perception that central banks are attacking the problem very aggressively," said Francisco Diez, director of emerging markets trading at RBC Capital Markets in New York.

Mexico's peso saw its steepest declines since a 1995 currency crisis in October amid worries that the world's major economies were slipping into recession.

Last month, stocks fell nearly 18 percent and bond yields surged around 300 basis points as investors dumped emerging market assets.

"The worst-case-scenario has already been priced in, and we saw that over the past month. Most of the currencies have reached massively oversold levels and they are going back to more normalized levels," Diez said.

In debt trading, the yield on the government's benchmark 10-year peso bond MX10YT=RR fell 17 basis points to 8.78 percent.

In the equities market, shares of Wal-Mart de Mexico (WALMEXV.MX) jumped 2.84 percent to 35.80 pesos.

Surging metals prices lifted local mining shares as Grupo Mexico (GMEXICOB.MX), the country's top copper producer, gained 5.41 percent to 11.10 pesos. Penoles (PENOLES.MX), owner of major silver mines, climbed 12.91 percent to 130.54 pesos. (Reporting by Michael O'Boyle; editing by Gary Crosse)