December 1, 2008 / 7:44 PM / 9 years ago

CANADA STOCKS-TSX retreats on commodity price drop

*TSX falls as much as 8 pct; erases Friday's 5.9 pct rise

*Energy shares drop as oil falls below $50 a barrel

*Grim U.S. manufacturing data stirs concern about Canada (Recasts, adds quote, details, updates figures)

By Jennifer Kwan

TORONTO, Dec 1 (Reuters) - Toronto's main stock index .GSPTSE tumbled on Monday afternoon in a broad sell-off as resource shares dropped along with commodity prices and gloomy U.S. manufacturing data signaled a deepening economic slump.

The Toronto Stock Exchange's six-day streak of gains appeared to be coming to an end as the energy sector fell 11 percent. Oil dropped below $50 a barrel after OPEC decided to wait until mid-December to make another cut in output. [ID:nSP341852] Among energy stocks EnCana Corp (ECA.TO) fell 10.7 percent.

Weakness in metals prices helped to push down the mining-heavy materials sector, which was down 10.7 percent. Goldcorp Inc (G.TO) sank 13.6 percent.

The Toronto market was pushed lower by weak manufacturing data from China and Europe, while data showing the Canadian economy had grown faster than expected in the third quarter had little influence on trading.

Indeed, the biggest impact came from U.S. data showing factory activity fell to its weakest in November since the 1981-82 recession. [ID:nN01439823].

"Weaker manufacturing numbers really don't bode well for Canada," said Steve Ibel, institutional equities trader at Beacon Securities, in Halifax, Nova Scotia. "If the economy as a whole is weakening, then there's going to be less demand for basically most commodities across the board."

Shortly after 1:30 p.m. (1830 GMT), the S&P/TSX composite index .GSPTSE was down 701.22 points, or 7.56 percent, at 8,569.40, with all of its 10 main groups in the red. Earlier, the index dropped 8 percent.

The decline, which followed slumps in Europe [MKTS/GLOB] and on Wall Street, erased the TSX's 5.9 percent gain on Friday.

"All we've done is retrace, basically, Friday's gains," said Julie Brough, vice president at Morgan Meighen & Associates, noting volumes were thin so any movement on the upside didn't have a lot of muscle behind it.

Last week, the Toronto index rose nearly 14 percent, leading some analysts to speculate the market was trying to find a bottom.

Before going higher, however, the TSX may have to retreat to lower levels of around 7,700 reached in November, Ibel said.

"We have to retest our last low there and that's when we might be able to form a bottom," said Ibel. "I think we're still in for a bit more weakness here."

Financials fell 7.2 percent with Manulife Financial (MFC.TO) down 11.8 percent at C$21.17, and Royal Bank of Canada (RY.TO) down 8.3 percent at C$39.59.

Air Canada ACa.TO slumped 11 percent to C$1.96. Earlier, the company said that Groupe Aeroplan Inc AER.TO, the operator of the airline's frequent flyer plan, has agreed to speed payment for reward tickets issued under the plan, raising C$70 million for the cash-strapped carrier. [ID:nN01508489]

Groupe Aeroplan fell 4.7 percent to C$7.51. ($1=$1.23 Canadian) (Reporting by Jennifer Kwan; Editing by Frank McGurty)

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