Mexico peso, stocks gain on global economy hopes

(Recasts, adds trader comments, closing prices)

MEXICO CITY, May 25 (Reuters) - Mexico's peso firmed on Monday and stocks rose after signs of economic stability in Asia and Europe supported appetite for emerging market assets.

The peso MXN=MEX01 gained 0.21 percent to 13.13 per dollar in low-volume trading as U.S. markets were closed for a public holiday. The IPC stock index .MXX closed 0.44 percent higher at 24,198.96 points.

Japan raised its economic outlook for the first time in three years on Monday, and an important measure of German business sentiment rose in May, backing views that the worst of the global recession may be over.

Such hopes have fueled a rally in emerging market assets since March.

"If we get more signs that support the rally we have seen in emerging markets, the peso could keep gaining," said a trader in Mexico City.

Mexico's peso has rallied 18 percent from a 16-year low hit in March on hopes the U.S. recession is finding a bottom, which would point toward a recovery in Mexico since it sends about 80 percent of its exports to its northern neighbor.

"We expect the exchange rate to oscillate between 13.00 and 13.50 per dollar, depending on how U.S. activity develops in the coming days," Mexico City-based brokerage Invex wrote in a report.

Worries that Mexico's downturn could be deeper than expected have kept the currency from holding onto gains below 13 per dollar, analysts said.