UPDATE 2-Toronto stocks dip sharply on modest Fed rate cut

Tue Dec 11, 2007 3:11pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

(Updates to afternoon with analyst comment)

TORONTO Dec 11 (Reuters) - The Toronto Stock Exchange's main index reversed sharply on Tuesday afternoon, turning negative after the U.S. Federal Reserve cut rates by a modest quarter-percentage point, disappointing investors hoping for more.

Despite continued strength in commodity prices -- which earlier in the session drove the resource-heavy index up more than 85 points -- the materials sector led the fall, down 1.3 percent.

The Fed cut benchmark U.S. interest rates by 25 basis points on Tuesday, saying the move would help the world's biggest economy resist a recession.

"The market was begging for 50 basis points, but they didn't get it and they're not happy about it," said Vincent Delisle, strategist at Scotia Capital in Montreal.

"The disappointment will last a few days, but you typically get a good end-of-year rally. We'll probably end the year at the levels we're seeing now."

The S&P/TSX composite index .GSPTSE was down 110.98 points, or 0.8 percent, at 13,829.38 by late afternoon, with seven of its 10 main groups in the red. Earlier in the day, it was above the 14,000-point mark.

Financial shares dropped 0.6 percent and energy shares fell 0.5 percent, while the tiny telecom sector tumbled 1.1 percent.

BlackBerry maker Research In Motion RIM.TO led the retreat, falling C$2.13 to C$101.13. Oil and gas exploration company EnCana ECA.TO slipped C$1.68 to C$67.20, while Potash Corp of Saskatchewan POT.TO, the big fertilizer producer, was off C$1.38 at C$132.02.

Biovail Corp BVF.TO slipped 3 Canadian cents to C$14.98 after Canada's largest publicly-traded drugmaker said it had closed the book on a U.S. securities class action suit with a $138 million settlement.

($1=$1.01 Canadian) (Reporting by Jonathan Spicer; Editing by Rob Wilson)