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TORONTO (Reuters) - Canada's main equity index fell sharply on Monday, hurt by a drop in mining and energy companies as investor worries about signs of weak global growth pushed down commodity prices.
Oil, gold and copper prices all fell after German economic data disappointed markets and Spanish and Greek debt worries flared anew in the euro zone.
The Toronto index - almost half of which is focused on the extraction of natural resources - is now back at a level last seen more than a week ago just as the U.S. Federal Reserve's new stimulus measures lit a match under a string of commodities.
"I think we're getting to a point where a lot of the good news is built in, so we're looking for a bit of a pullback," said Levente Mady, a market strategist at Union Securities in Vancouver.
He said the outlook for commodity-related stocks is "iffy at best" and hugely reliant on growth in Chinese demand. "The Chinese stock market is at new three-year or four-year lows, that is not pretty," Mady said.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed 70.06 points, or 0.57 percent, lower at 12,313.54. That was its biggest single-day decline since late August.
"Demand (for commodities) is not particularly encouraging," said Fred Ketchen, director of equity trading at ScotiaMcLeod. "Until people find some reason to buy they're going to stand on the sidelines, and when you stand on the sidelines, the sellers take control."
German business sentiment dropped for a fifth successive month in September, Munich-based think tank Ifo said, a sign that companies are being hit by the euro zone debt crisis, which is squeezing demand and investment.
The price of bullion slipped but remained underpinned by expectations of longer-term price strength after central banks, including the Fed and the European Central Bank, announced fresh rounds of monetary policy easing earlier this month. <GOL/>
Shares in Valeant Pharmaceuticals International Inc (VRX.TO) rose 0.8 percent to C$53.75 after it said it had acquired a drug to treat age-related blindness from QLT Inc QLT.TO. QLT shares jumped 7.6 percent to C$7.97.
Editing by Peter Galloway