Mexico peso rises on risk appetite; stocks edge up

(Adds analyst comments, updates prices)

MEXICO CITY, Aug 13 (Reuters) - Mexico's peso firmed to a nine-month high on Thursday as appetite for higher risk assets grew after data showed Europe's biggest economies had exited recession.

The peso MXN=MEX01 traded 0.37 percent stronger at 12.8975 per dollar. Early in the session, the currency hit 12.77, its strongest since November.

The IPC stock index .MXX rose 0.10 percent to 28,122.

Germany and France surprised markets by posting positive growth in preliminary second quarter estimates, earlier than policymakers and economists had expected.

That added to optimism after the U.S. Federal Reserve said Wednesday it saw signs of a more stable economy in the United States, Mexico's top trading partner.

The Mexican currency later pared gains after data showed an unexpected drop in sales at U.S. retailers in July, suggesting Mexico's exporters could still face a bumpy road to recovery.

"The U.S. data came out on the poor side, but people are showing they are eager to buy risk on any dips," said Gerardo Margolis, vice president of emerging markets at TD Securities in Toronto.

Investors are fretting over whether a real economic pickup will justify this year's rally in emerging markets and global stocks.

Mexico's peso has lagged gains in other emerging markets, due to expectations Mexico's debt could be downgraded later this year unless the government passes tax reforms.

But some strategists are betting the peso will outperform its peers in the coming months, as it benefits more from perceptions of a U.S. recovery.

"Even if we see a big sell-off in equities, the peso will still outperform against other currencies. People will still think that the U.S. will get out this recession sooner than others and that will benefit Mexico more than any one else," Margolis said.

In stock trading, Mexican banks led gains, helped by optimism about U.S. bank stocks. Inbursa (GFINBURO.MX), the financial group controlled by billionaire Carlos Slim, gained 3.61 percent to 40.75 pesos while the biggest locally owned bank Banorte (GFNORTEO.MX) rose 3.08 percent to 37.10 pesos.

Shares in dominant local retailer Wal-Mart de Mexico (WALMEXV.MX) lost 2.14 percent to 46.61 pesos after UBS cut the stock to "sell," saying it has become too expensive.

On Monday, shares in Walmex, as the company is known, hit their highest since February 2007.

UBS noted that Walmex is trading at a 60 percent premium to parent Wal-Mart's (WMT.N) stock. "We see no reason for these premiums to persist," UBS wrote. (Reporting by Michael O'Boyle)