The outlook for the Mexican economy is now certainly worse than initially expected. The fact that they are easing is not a bullish sign for the market.
Mexico's stocks and currency did not lose as much as other markets in the region on news that the Argentine government's plan may be in trouble.
Mexican stocks finished in line with the Dow and the spreads on Mexican debt were almost unchanged. Investors still see Mexico as a safe haven in the region.
A lot of dedicated Latin American investors put money in Mexico betting on its safe-haven status. As things looked like they were heading for a full-blown crisis in Argentina, many took some profits in Mexico to raise cash.
We think the stock market will now turn its attention to the unfolding cyclical turnaround in the Mexican economy.