UPDATE 3-Toronto index drops 6 pct as fertilizers dive

Thu Oct 2, 2008 3:28pm EDT
 
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* Potash, Agrium tumble after Merrill Lynch downgrade

* Energy sector falls 8 percent as oil slides to $94

* U.S. Senate approval of bailout fails to lift mood

(Adds details, updates figures)

TORONTO, Oct 2 (Reuters) - The Toronto Stock Exchange's main index sank more than 6 percent on Thursday afternoon to its lowest in two years, dragged down by concern over the outlook for fertilizer producers and a drop in oil and gold prices.

Potash Corp of Saskatchewan (POT.TO: Quote) and Agrium Inc (AGU.TO: Quote), which had helped power the market during the commodities boom, dropped more than 20 percent after Merrill Lynch downgraded the stocks because uncertainty over earnings for the sector. [ID:nN02254052].

The hefty materials group, which includes fertilizer companies, led the market down, tumbling 13 percent.

The energy sector slid 8 percent as oil retreated to $94 a barrel on persistent concerns over weakening demand in a cooling global economy [ID:nSP360782].

The U.S. Senate's passage of a revised, $700 billion financial rescue plan late Wednesday failed to dispel worries over how evaporating credit is affecting the wider economy.   Continued...