Brief Market Rally Fizzles on Volatile Political Events
MEXICO CITY (AP) _ A brief market rally fizzled late Wednesday as enthusiasm over falling interest rates at the weekly bond auction gave way to rising concern about the volatile political situation.
The market shot up 2.13 percent in the first two hours of trading, buoyed by a nearly 10 percent drop in bellwether 28-day treasury bonds and by word of a dramatic development in the investigation of a political assassination.
But the market closed down 2.1 percent to 1,517.96 percent despite congressional testimony by Treasury Secretary Guillermo Ortiz vowing Mexico has the resources to lick its economic crisis.
He briefed lawmakers on the details of $20 billion credit package extended by President Clinton on Feb. 22, saying none had been used yet. He said the government was considering drawing only on half the money and leaving the rest for emergencies.
The peso firmed up slightly Wednesday, from 5.975 to 5.945 to the dollar.
Mexican authorities announced the arrest of Raul Salinas de Gortari, Carlos Salinas’ brother, after the market closed Tuesday.
``The news of the arrest is positive in the longer term. But in the short term political events are complicated,″ said market analyst Alvaro Shiraishi of the Mexican brokerage Bursamex.
New President Ernesto Zedillo had been accused of weakness in the face of a swiftly devaluing peso that confronted him just 20 days into his term.
``The arrest shows Zedillo can take decisive action but there’s still uncertainty in the marketplace and there’s still volatility,″ Shiraishi added.