Mexico peso slips on ratings worries, stocks jump

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MEXICO CITY, Nov 5 (Reuters) - Mexico's peso weakened sharply on Thursday, hurt by worries that tax reforms passed last weekend will not be enough to stave off a downgrade of the country's debt, while stocks rose on strong U.S. data.

The peso MXN=MEX01 lost 0.7 percent to 13.385 per dollar, extending early losses as the U.S. currency broadly gained.

Concerns that Wall Street ratings agencies could cut the country's debt rating after lawmakers passed watered-down tax hikes that may not sufficiently curb the government's dependence on oil income have weighed down the currency this week.

"What is keeping the peso under pressure is the uncertainty with respect to what the agencies could decide on Mexico's rating," said a trader in Mexico City.

Stocks rose after U.S. data showed a jump in productivity and a drop in new claims for jobless aid, boding well for economic recovery in the United States, Mexico's top trading partner.

The IPC stock index .MXX rose 1.14 percent to 29,763 points as shares in America Movil (AMXL.MX) rose 2.43 percent to 31.18 pesos while copper miner Grupo Mexico (GMEXICOB.MX) added 1.07 percent to 27.44 pesos.

U.S. business productivity in the third quarter grew at the fastest pace in six years while initial claims for state unemployment fell to a 10-month low last week, indicating the labor market may be hitting bottom.

Mexico is counting on a rebound in demand for its exports in the United States to help pull it out of the deepest local recession since the 1930s. (Reporting by Michael O'Boyle and Jean Luis Arce; Editing by Andrea Ricci)