Mexico assets gain on positive U.S. economic data

(Recasts, adds detail and closing prices)

MEXICO CITY, Jan 3 (Reuters) - Mexico's peso and bonds gained on Thursday, while stocks bounced back a day after dropping sharply on fears of a U.S. recession.

The benchmark IPC stock index .MXX added 0.56 percent to end at 28,860.78 points after new orders at U.S. factories surged a larger-than-expected 1 percent in November and U.S. employment data, although poor, was better than many traders feared.

Mexico's economy depends heavily on the United States, where it sends about 80 percent of its exports.

The IPC had risen as much as 1.2 percent earlier on Thursday.

The peso currency MXN= MEX01 firmed 0.28 percent to 10.8770 per dollar, helped as foreigners increased their bets in the stock market, traders said.

In debt trading, the yield on the benchmark government 10-year peso bond MX10YT=RR was trimmed by 2 basis points to 8.17 percent. The yield on 20-year peso debt MX20YT=RR was flat at 8.25 percent.

Modelo (GMODELOC.MX), the brewer of Corona beer, was among the top performing stocks in Mexico on Thursday, up 4.11 percent to 53.20 pesos.

Dominant retailer Wal-Mart de Mexico (WALMEXV.MX) picked up 2.14 percent to 36.80 pesos.

UBS said in a report on Thursday its favorite stocks for 2008 include cellphone operator America Movil (AMXL.MX) (AMX.N), Wal-Mart de Mexico and drinks maker Femsa (FMX.N).

It said its picks were based on domestic growth expectations, cheap cash flows, defensiveness from competition and consumer growth.

Mexican stocks had slumped almost 3 percent on Wednesday, the first session of 2008, on ongoing worries that problems in the U.S. credit and housing markets could drive the economy into a recession.

Mexico's IPC stock index ended 2007 with a 11.7 percent gain, while the peso weakened 1 percent versus the dollar. (Reporting by Noel Randewich; editing by Leslie Adler)