UPDATE 3-Toronto stocks fall as US worries hit financials

Tue Dec 4, 2007 5:20pm EST
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By Leah Schnurr

TORONTO Dec 4 (Reuters) - The Toronto Stock Exchange's main index finished lower on Tuesday as financial issues were hit by more worries over the health of the U.S. economy.

The stimulating effect of a cut in interest rates by the Bank of Canada was undermined by a gloomy outlook from the bank, which said it expects U.S. subprime mortgage troubles to last longer than anticipated. The central bank cut its key rate to 4.25 percent from 4.5 percent.

Financial shares slid 1.1 percent, with Canadian Imperial Bank of Commerce (CM.TO: Quote) down C$2.96, or 3.4 percent, at C$84.75, and Bank of Montreal (BMO.TO: Quote) off C$1.64, or 2.7 percent, at C$59.96.

"The eye of the storm is still in the U.S. in terms of what's going to happen there," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

"Are we in a mid-cycle slowdown or are we in a recession -- we haven't declared it yet."

Also in the sector, Laurentian Bank of Canada (LB.TO: Quote) was down C$1.16, or 2.9 percent, at C$39.44 after its fourth-quarter earnings missed expectations.

The S&P/TSX composite index .GSPTSE closed down 77.55 points, or 0.57 percent, at 13,579.62 with six of the index's 10 main groups lower.   Continued...