Selling abates in Mexican markets and U.S. travel shares

Mexico's financial markets have stabilized today after Monday's dive on fears of economic calamity from the swine flu outbreak.

U.S. airline and hotel stocks, which also plunged on Monday, are mixed.

The Mexican stock market's IPC index, which slid 3.3% on Monday, fell as much as 1.6% early today but was off just 53 points,or 0.2%, to 21,774 at about 11 a.m. PDT.

The peso has rallied back to 13.87 per dollar after tumbling to 14.05 per dollar on Monday from 13.34 on Friday.

From Bloomberg News:

There is a sense "the government is taking the necessary measures so that things return to normal" by next week, said Antonio Magana, head of the foreign-exchange trading desk at Grupo Financiero Interacciones in Mexico City. "We’re going to begin to see less negative news."

Mexican authorities have ordered all schools shut nationwide until May 6 and some businesses to close as the number of cases suspected to be swine flu rose. The government has advised people not to congregate in large groups and to avoid shaking hands and kissing. The army is distributing face masks throughout Mexico City, where the disease has been concentrated, and the government has said it has enough antiviral medicine to treat the flu.

Facing a worsening economy even before the flu outbreak, Mexico earlier this month arranged with the International Monetary Fund for a standby $47-billion credit line. The line could be used to help defend the peso, which had been sinking fast in February and March and reached a record low of 15.6 per dollar on March 9.

The spreading disease "raises the odds of tapping the facility," Eduardo Levy-Yeyati, head of emerging-market strategy at Barclays Capital Inc. in New York, told Bloomberg. "The flu increases growth risks and currency pressures."

As for U.S. travel-related shares, Continental Airlines was up 18 cents to $11.26 at about 11 a.m. PDT, after tumbling 16% on Monday. AMR, parent of American Airlines, was up 14 cents to $4.84. But United parent UAL was off 19 cents to $5.31.

Carnival Corp., the cruise line operator, was up $1.33, or 5.4%, to $25.92 after sliding 13.5% on Monday.

-- Tom Petruno

Photo: Subway riders in Mexico City today. Credit: Joe Raedle / Getty Images

Comments

[Glen]

My Daughter flew in late last night from Mexico City were we have an appartment, to San francisco. This story is part of the PR campain to convince the markets everything is under control when they are not. She said that hardly anyone is wearing masks. I thought it was rubbish when they kept saying on CNN that even earliy morning cleaners on the streets were wearing masks, They always wear masks. Now I'm even thinking that they're going to manipulate the flu numbers like they do with all the other numbers that come out of the Mexican Gov't like Inflation and Unemployment. When I tell my Mexican friends that inflation is only 6.5% and unemployment is better than in the USA and Europe at 5.5% or so, the have a big laugh.