February 5, 2008 / 9:44 PM / 10 years ago

UPDATE 3-Toronto stock index drops 300 pts on recession fear

(Updates numbers, adds details, quotes)

TORONTO, Feb 5 (Reuters) - In its worst session in two weeks, the Toronto Stock Exchange’s main index dived on Tuesday, led lower by resource shares amid a broad selloff sparked by heightened worries of a U.S. recession.

Data from the U.S. Institute for Supply Management showed its key non-manufacturing services index dropped in January, spurring concern the slump in the U.S. housing market has infected the wider economy.

Lower commodity prices also put pressure on the resource-heavy Toronto benchmark, with the energy and materials sectors losing 2.6 percent and 2.9 percent respectively.

“I think (the ISM number) points to something that’s really slowing down - call it a recession, call it a major slowdown, it doesn’t matter,” said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc., in Vancouver.

The S&P/TSX composite index .GSPTSE closed down 326.21 points, or 2.46 percent, at 12,931.95 with all of its 10 main groups lower.

Suncor Energy (SU.TO) was off C$3.20, or 3.3 percent, at C$92.76, while crude oil fell more than $2 a barrel on worries that U.S. slowdown could staunch demand for energy.

The gold producers subindex tumbled 2.1 percent, as gold was hurt by a higher U.S. dollar and profit-taking. Kinross Gold (K.TO) lost 32 Canadian cents, or 1.5 percent, to C$21.05.

Elsewhere in the sector, Centerra Gold (CG.TO) fell 87 Canadian cents, or 5.7 percent, to C$14.45 amid reports that Kyrgyzstan had begun a tax-evasion investigation into the company’s Kumtor mine.

The banking sector, the largest group on the index, fell 1.9 percent. Royal Bank of Canada (RY.TO) was down 81 Canadian cents, or 1.6 percent, at C$49.89, and Canadian Imperial Bank of Commerce (CM.TO) gave up C$1.64, or 2.3 percent, to C$70.00.

The consumer staples group slid 1.9 percent, but Shoppers Drug Mart SC.TO bucked the trend after it said fourth-quarter profit jumped 16 percent and raised its dividend by 34.4 percent. Shoppers, Canada’s largest pharmacy chain, was the biggest net gainer, up C$2.11, or 4.4 percent, at C$49.63.

In the last two sessions, 386 points have been knocked off the index, erasing the lion’s share of the gains the Toronto benchmark made last week. The index had been moving higher since pulling out of mid-January’s five-day freefall.

$1=$1.01 Canadian Reporting by Leah Schnurr; Editing by Peter Galloway

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