Mexico Stocks Rise, Peso Strengthens After Rate Cut

    MEXICO CITY--Mexican stocks rose early Friday, and the peso strengthened against the U.S. dollar, after the country's central bank announced the second rate cut of the year to help spur a sluggish economy.

    The IPC index of leading issues was up 0.6% at 39937 points around 10:30 a.m. EDT on volume of 30 million shares worth 872 million pesos ($66 million).

    The peso was trading in Mexico City at MXN13.2340 to the U.S. dollar, compared with MXN13.3890 Thursday.

    The Mexican currency fell slightly just after Mexico's central bank early Friday morning announced a 25-basis-point cut in the overnight interest rate to 3.75%, but it quickly recovered the lost ground.

    The Bank of Mexico's decision was a surprise for most economists, who expected the bank to stand pat as the peso had depreciated in recent weeks due to the expectations that the U.S. Federal Reserve would start to withdraw dollar liquidity in the near future.

    The central bank's rate cut is the second move to lower the borrowing costs in seven months, as Mexico is heading this year to the worst economic performance since 2009. The country's economy contracted 0.7% in the April-June period, compared to the first quarter, affected by an ailing construction sector and a weak external backdrop.

    Among decliners Friday, wireless carrier America Movil fell 0.2% to MXN12.94, while retailer Wal-Mart de Mexico was up 1% to MXN32.36. Cement maker Cemex was down 0.9% at MXN14.75.

    Write to Juan Montes at