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MEXICO CITY (Dow Jones)--Mexico's stocks rose early Friday, as data showing an improvement in U.S. consumer sentiment fueled buying in the last trading session of May.
The benchmark IPC index of leading issues was up nearly 0.7% at 24,823.41 points around 10:33 a.m. EDT. Volume was 51.3 million shares worth 989.7 million pesos ($75.6 million).
U.S. markets, which influence the IPC, were also higher in volatile trading as an improvement in consumer confidence offset a report showing weaker-than-expected business activity in the Chicago area.
Mexico is heavily dependent on the U.S. economy, buyer of about 80% of Mexico's exports.
Investors face a heavy data calendar next week that could help to extend, or derail, the IPC's three-month rally, with a number of key U.S. economic reports on tap, including personal income, construction spending, factory orders, and the Department of Labor's monthly jobs report.
The CPO shares of cement maker Cemex (CX) were up 1.8% to MXN12.99, the O shares of banking group Banorte (GFNORTE.MX) were trading 3.5% higher at MXN31.56, and the CPO shares of media group Televisa (TV) were 1.3% higher at MXN46.89.
Among declining issues, the B shares of retail giant Wal-Mart de Mexico were down 0.3% to MXN38.80, shares of construction and engineering company Empresas ICA (ICA) were off 0.7% to MXN26.00, and the L shares of mobile operator and market heavyweight America Movil (AMX) were down 0.9% to MXN25.56.
Mexico's peso held on to early gains after the Bank of Mexico said that starting June 9 it will reduce the amount of U.S. dollars it sells directly on the market each day to $50 million from $100 million.
The central bank also said it will cut to $250 million from $300 million the dollars it auctions at a minimum exchange rate of 2% above the previous day's fix.
The Bank of Mexico said its decision was based on a narrower-than-expected current account deficit for 2009, greater stability in the foreign exchange markets, and a $47 billion flexible credit line from the International Monetary Fund.
The peso was recently quoted in Mexico City trading at MXN13.1170 to the U.S. dollar, compared with Thursday's close of MXN13.2410.
"We believe that price action in USD/MXN should be limited," UBS Pactual economist Gabriel Casillas said in a note. "Bank of Mexico will continue selling a significant amount of dollars to the market in the upcoming months."
Meanwhile, the yield on 20-year Mexican government bonds maturing in 2024 was off 11 basis points to 8.29%. Bond prices move inverse of yields.
In local economic news, the Finance Ministry said Thursday night the federal government plans to cut administrative and operating costs by MXN35 billion this year to counter the budget effects of the economic downturn and the recent outbreak of a new strain of influenza.
The ministry said in a statement that the cuts won't affect social development programs or investment projects, and are in keeping with the counter-cyclical spending plans to cushion the economic recession.
The government planned a fiscal deficit equivalent to 1.8% of gross domestic product, but Finance Minister Agustin Carstens said earlier this month that it could end up being 2% as a result of the recession and the measures taken to confront the flu outbreak.
The government expects GDP, which fell 8.2% year-on-year in the first quarter, to end the full year down 5.5%.