TSX has biggest drop in two months as Syria fears mount

Tue Aug 27, 2013 5:18pm EDT
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By John Tilak

TORONTO (Reuters) - Canada's main stock index recorded its biggest single-day percentage decline in more than two months on Tuesday as the likelihood grew that the West will launch a military strike against the Syrian government.

Concern over the fallout from poison gas attacks by the Syrian government took the market spotlight away from two of the country's biggest banks, Bank of Montreal (BMO.TO: Quote) and Bank of Nova Scotia (BNS.TO: Quote), which reported quarterly earnings that topped expectations.

Sharp gains in commodity prices also failed to boost sentiment. The uncertainty about Syria fueled a rush to gold, a perceived safe-haven asset, and bullion prices hit a three-month high. Oil prices surged to a six-month high as any instability in the Middle East would create supply problems. <GOL/> <O/R>

Despite its resource-heavy composition, every major sector on the index ended in the red.

The United States and its allies could attack Syria within days, Western envoys have told rebels fighting President Bashar al-Assad.

"There are a few negative vibrations in the market," said Michael Sprung, president of Sprung Investment Management. "Turmoil in the Middle East could cause a spike in oil prices, which could result in a slowdown in economic activity."

"Investors should be looking for opportunities as some of the better companies sell down, opportunities to buy in and increase the quality of the holdings in their portfolio," he added.

The Canadian market, which hit a three-month high the previous session, reflected weakness across world stock markets spurred by worry over Syria.   Continued...

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch