UPDATE 4-Recession worries drag Toronto stocks down 5 pct

Mon Oct 6, 2008 5:34pm EDT
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* Oil and gas sector falls 9 pct, leads market tumble

* Financial group declines after European selloff

* Scotiabank sees Canadian recession (Adds quotes and details)

By Cameron French

TORONTO, Oct 6 (Reuters) - The Toronto Stock Exchange's main index dropped more than 5 percent on Monday, as signs that the U.S. financial crisis was spreading to European banks sent investors in world markets running for the exits.

The commodity-heavy TSX posted its biggest intraday loss since Black Monday in 1987, falling more than 10 percent at one point before regaining about half its losses.

Worries over a global recession sent oil prices tumbling, leading to a 9.4 percent drop for the energy sector, which was the weakest of the 10 main TSX subgroups, all of which finished in the red.

"Clearly you have motivated selling. Whether it be margin calls, whether it be hedge fund activity or whether it just be general investor nervousness, given that there are a lot of imponderables out there making people quite nervous," said Irwin Michael, portfolio manager at ABC Funds.

The S&P/TSX composite index .GSPTSE ended down 572.92 points, or 5.3 percent, at 10,230.43.   Continued...