Mexico peso, stocks soar as US recession fears ease

(Updates prices)

MEXICO CITY, May 18 (Reuters) - Mexico's peso firmed sharply on Monday and stocks rose, helped by upbeat outlooks on two large U.S. companies that could signal an easing of the recession in the United States, Mexico's main trading partner.

The peso MXN=MEX01 gained 1.22 percent to 13.084 per dollar while the IPC stock index .MXX rose 1.65 percent to 23,727 points, tracking gains on Wall Street.

Stronger-than-expected quarterly results and a higher 2009 earnings outlook from No. 2 U.S. home improvement chain Lowe's Cos Inc (LOW.N: Quote, Profile, Research) boosted hopes the recession was abating while positive broker comments on Bank of America (BAC.N: Quote, Profile, Research) lifted confidence in the financial industry.

The U.S. downturn has driven Mexico into a deep recession, and hopes for a recovery in Mexico depend on a rebound in U.S. demand for its exports.

"Investors are looking at things a bit more calmly," said Omar Martin del Campo, a currency trader at Banco Ve por Mas in Mexico City, who said the peso could hold onto gains this week if U.S. markets continue to rise.

"It's not that we have touched bottom, but at least there has not been more bad news."

Other analysts said the peso could weaken this week on local data that is expected to be gloomy and on worries about Mexico's credit rating.

Last week, Standard & Poor's signaled it could downgrade Mexico's debt later this year and Fitch Ratings, which put Mexico on a negative outlook last fall, could move even sooner, analysts say.