Mexico peso up on US stimulus hopes; Walmex sinks
(Adds closing prices, details on Walmex, 10-year bond)
MEXICO CITY, Jan 6 (Reuters) - Mexico's peso firmed sharply on Tuesday on hopes major stimulus plans will help push the United States out of recession and boost the Mexican economy, while shares in Wal-Mart de Mexico sank after UBS cut its recommendation on the retailer.
The peso currency MXN=MEX01 strengthened for the fourth straight session, gaining 1.05 percent to 13.355 per dollar at the central bank's close.
Investors looked past weak U.S. economic data and focused on hopes for U.S. President-elect Barack Obama's stimulus plan. Obama is seeking quick action from Congress on a package of spending and tax-cut measures that would total nearly $775 billion over the next two years.
The plan bodes well for Mexico, which sends around 80 percent of its exports to its northern neighbor.
"The reactivation of the U.S. economy implies a greater recuperation in flows of remittances and exports," said Enrique Trejo, head of currency trading at Ixe brokerage.
In 2008, the peso weakened 21 percent as investors dumped emerging market assets during the global credit crisis.
The benchmark IPC stock index .MXX ended down 1 percent on Tuesday at 23,005.41 points, hit mostly by losses in top retailer Wal-Mart de Mexico (Walmex).
Shares in Walmex (WALMEXV.MX) fell 4.9 percent to 36.09 pesos, hurt by a UBS (UBSN.VX) (UBS.N) downgrade on its stock to "sell" from "neutral" in anticipation of slower sales due to tough economic conditions.
Walmex is due to release December sales on Wednesday and is expected to report a 1.4 percent drop in same-store sales compared to the same month in 2007, according to a Reuters survey. [ID:nN06411955]
Shares in America Movil (AMXL.MX), Latin America's biggest cell phone operator, lost 0.7 percent to 22.74 pesos while its shares on Wall Street (AMX.N) were flat at $34.12.
In debt trading, the benchmark government 10-year peso bond MX10YT=RR fell 0.258 in price, pushing its yield up 4 basis points to 7.73 percent.
The losses broke a four-session rally that had pushed the 10-year's yield to an 8-1/2-month low.
The 10-year bond has fallen more than 200 basis points since mid-November amid increasing bets that Mexico's central bank soon could begin to relax its key interest rate from 8.25 percent to boost the slowing economy.
Some economists think policy-makers could make their first interest rate cut this month, while others think the central bank could hold off on lowering borrowing costs as the peso's recent depreciation may have added to inflation, which is running at its highest rate in more than seven years. (Reporting Michael O'Boyle; Editing by Leslie Adler)
