Mexico stocks, peso jump on rate cuts, Fed line

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MEXICO CITY, Oct 30 (Reuters) - Mexican stocks jumped on Thursday and the peso firmed after the U.S. Federal Reserve extended a swap line to Mexico and more central banks followed the Fed in cutting interest rates.

The IPC stock index .MXX gained 5.07 percent to 20,128 points, while the peso MXN=MEX01 strengthened 0.86 percent to 12.85 per dollar.

The Fed cut its benchmark fed funds rate by half a percentage point to 1 percent on Wednesday, action that was soon followed by cuts in Taiwan and Hong Kong, while Japan, the European Central Bank, Australia and the Bank of England are also expected to soon cut rates.

Investors bet that the cuts will help reduce the impact of global recession.

The Fed also announced on Wednesday that it set up a $30 billion swap line with Mexico, as well as three other major emerging markets, to bolster dollar liquidity.

"This is putting some confidence back into the markets and the region," said Eduardo Saenger, head of equity trading and sales at BullTick Capital Markets in Mexico City.

Mexico's central bank burned through $13.1 billion, around 15 percent of its international reserves, this month as it defended the peso's value amid a massive sell-off of emerging market assets and a scramble for dollars by local companies with dollar-denominated debt.

Mexican companies lost billions of dollars due to bets in currency derivatives markets that went bad with the peso's sudden depreciation.

While Mexico said it would not immediately tap the line, analysts said the measure would allow the central bank to stabilize the peso in another bout of global volatility without having to deplete its reserves.

The peso saw its steepest declines this month since a 1995 currency crisis, while stocks were down 23 percent this month, before Thursday's gains.

In debt trading, the yield on the government's benchmark 10-year peso bond MX10YT=RR fell 4 basis points to 9.13 percent.

In the equities market, shares of America Movil (AMXL.MX), Latin America's biggest cell phone operator, jumped 7.88 percent to 19.45 pesos while its stock in New York (AMX.N) gained 7.42 percent to $30.26.

Shares of top retailer Wal-Mart de Mexico (WALMEXV.MX) added 5.01 percent to 35.81 pesos.

Banorte (GFNORTEO.MX), the largest locally owned bank, climbed 12.83 percent to 22.51. (Reporting by Michael O'Boyle; Editing by Andrea Ricci)