September 8, 2008 / 9:14 PM / 9 years ago

UPDATE 5-Toronto stocks tumble on resource demand fears

*TSX gives back big early gains

*Resource shares fall on worries over demand

*RIM falls on concern of slowing smartphone market (Adds details, quotes)

By Leah Schnurr and Natasha Elkington

TORONTO, Sept 8 (Reuters) - The Toronto Stock Exchange’s main index closed at its lowest level in more than seven months on Monday after early enthusiasm over the U.S. mortgage bailout plan fizzled as worries over slowing growth weighed on resource and tech shares.

After jumping more than 2 percent early in the session, the heavyweight energy and materials sectors led the downside as worries resurfaced over how demand for commodities will fare in the face of sluggish global growth.

In the oil patch, Canadian Natural Resources (CNQ.TO) slid 4 percent to C$80.00, while fertilizer producer Potash Corp of Saskatchewan (POT.TO) was the biggest net loser, falling 5.7 percent to C$162.50.

BlackBerry-maker Research In Motion RIM.TO also dragged on the index, falling 3.8 percent to C$108.91, after a report that said the global smartphone market is being hurt by the slowing economy. For details, see: [ID:nL8709082].

“I think the world globally is actually slowing down,” said Paul Harris, portfolio manager at Avenue Investment Management.

“You have seen it in China and the rest of Europe, so I think that just puts a damper on the ability for commodities to grow.”

The S&P/TSX composite index .GSPTSE closed down 181.59 points, or 1.42 percent, at 12,634.83 with all but two of its 10 main sectors in negative territory.

It was the lowest closing level since the end of January, when the index fell more than 600 points in one day, concluding a five-day retreat, on fears of a U.S. recession.

The benchmark index has racked up triple digit losses in four out of the past five sessions, sending it down more than 8 percent.

The financial sector led the upside, buoyed after the U.S. government took control of mortgage finance giants Fannie Mae FNM.N and Freddie Mac FRE.N on Sunday, the latest in a series of emergency steps to help the struggling U.S. economy.

“What it does do, because they both owe so much money, is that improves credit markets generally and that’s very positive for anyone owning any debt of any kind at this point,” said Douglas Davis, president at Davis-Rea.

On Bay Street, all the major banks pushed higher, including National Bank of Canada, which rose 4.4 percent to C$52.51, while Canadian Imperial Bank of Commerce (CM.TO) gained 3.4 percent to C$64.42. The sector overall gained 1.5 percent.

The energy and materials sectors lost 3.4 percent and 4.9 percent, respectively. Among the laggards, Agnico-Eagle Mines (AEM.TO) was down 7.4 percent at C$51.26, while Suncor Energy (SU.TO) fell 6.7 percent to C$49.16.

“I think that people are concerned that if we have a world-wide recession, which is now what is being touted, that the demand for resources will decline for a period of time and therefore, resource prices won’t come back to their tops for some time,” Davis said.

The small tech sector slipped 1.6 percent, weighed down by RIM, while Nortel Networks NT.TO was off 2.5 percent to C$5.93.

Market volume was 450 million shares worth C$8 billion. Decliners outpaced advancers 906 to 622. The blue chip S&P/TSX 60 index .TSE60 closed down 11.11 points, or 1.45 percent, at 754.39.

On Wall Street, stocks soared on hopes that the bailout plan would stabilize the U.S. housing sector and ease nerves over the financial markets.

The Dow Jones industrial average .DJI closed up 290.43 points, or 2.59 percent, at 11,510.74, while the Nasdaq composite index .IXIC was up 13.88 points, or 0.62 percent, or 2,269.76. ($1=$1.06 Canadian) (Editing by Peter Galloway)

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