Mexico peso rises on US rate cut bets, stocks slip

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MEXICO CITY, Sept 12 (Reuters) - Mexico's peso firmed on Friday after unexpectedly weak U.S. consumer spending data led investors to bet the Federal Reserve could further cut interest rates to prop up the economy in the United States.

The peso MXN= MEX01 firmed 0.63 percent to 10.5775 per dollar.

A report on Friday showing lower-than-expected U.S. retail sales in August and a sharp revision in July sales added to expectations that the economy of the United States is tipping into recession.

"The market is seeing more probability that the Federal Reserve could lower interest rates," said Mario Correa, an economist at Scotiabank in Mexico City. "There is also less nervousness about the financial sector in the United States."

Lower interest rates in the United States would push the spread with Mexico's relatively high interest rates wider, making peso-denominated assets more attractive to investors.

The peso started it climb on Thursday afternoon after the official central bank close as hopes of a rescue at troubled Wall Street giant Lehman Brothers fueled gains in emerging market currencies.

The IPC stock index .MXX traded 0.22 percent lower at 25,494, hit by losses after cement maker Cemex cut its earning guidance and its stock sank to a three-year low.

The U.S.-traded shares of Cemex (CX.N) shed 7.59 percent to $18.63, its lowest level since June 2005, after the world's No. 3 cement maker on Thursday cut its pretax earnings forecast for 2008 amid sharp housing slowdowns in its main markets.

Its stock in Mexico sank (CMXCPO.MX) 7.23 percent to 19.77 pesos after touching its lowest price in more than three years. (Reporting by Michael O'Boyle; Editing by Andrea Ricci)