CANADA STOCKS-TSX drops on U.S. auto bailout failure

Fri Dec 12, 2008 10:24am EST
 
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TORONTO Dec 12 (Reuters) - Toronto's main stock index was lower on Friday morning, but cut early steep losses after the U.S. government said it was considering using the $700 billion financial bailout fund to prevent the failure of car makers following the collapse of the U.S. auto bailout package in Congress.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 136.31 points, or 1.6 percent, at 8,255.54 after touching as low as 8,110.13 just after the open.

Energy issues led the way lower as the price of U.S. crude oil dropped 7 percent to $44.55 after the collapse of a $14 billion rescue for U.S. automakers caused heavy losses across global financial markets and Goldman Sachs predicted oil could fall to $30 a barrel.

Canadian Natural Resources (CNQ.TO: Quote) dropped 3.8 percent to C$43.00 and EnCana Corp (ECA.TO: Quote) slipped 2.6 percent to C$53.76.

Autoparts maker Magna International MGa.TO dropped 3.3 percent to C$34.41 as investors fretted about the fallout from the failure U.S. auto deal.

"The U.S. auto deal fell apart and energy prices are taking it on the chin," said Rick Hutcheon, president and chief operating officer at RKH Investments. "Everybody is panicking."

Overall, nine of the TSX index's 10 main groups were lower with the heavyweight energy group down 3.8 percent and the industrial group off 1.4 percent. The heavily weighted financial group fell 1.7 percent. ($1=$1.24 Canadian) (Reporting by Scott Anderson; editing by Peter Galloway)