UPDATE 2-Toronto stocks fall on rate decision, commodities

Tue Jun 10, 2008 1:04pm EDT
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(Updates to early afternoon)

*Index sags as Bank of Canada leaves interest rates alone

*Resources fall along with commodity prices

TORONTO, June 10 (Reuters) - The Toronto Stock Exchange's main index sagged on Tuesday afternoon, pressured by an unexpected decision by the Bank of Canada to hold interest rates steady, as well as by falling commodity prices.

Market watchers had largely been expecting a quarter-point rate cut, but the central bank kept its key interest rate at 3 percent and pointed to the threat of higher inflation.

"If you read the notes, (Bank of Canada Governor Mark Carney) is weighing the risks toward inflation as opposed to the growth side of the issue," said Paul Harris, portfolio manager at Avenue Investment Management.

The index was also hurt as shares of resource companies extended their decline as oil prices retreated and gold tumbled.

Agnico-Eagle Mines AEM.TO was down C$3.10, or 4.3 percent, at C$69.02, while in the oil patch, Suncor Energy SU.TO gave up C$1.58, or 2.3 percent, to C$68.42.

The S&P/TSX composite index .GSPTSE was down 142.12 points, or 0.95 percent, at 14,818.64 with six of its 10 main sectors falling. The benchmark briefly dropped as low as 14,749.40.   Continued...