UPDATE 1-Toronto stocks drop on metal prices, inflation fear

Fri Dec 14, 2007 10:31am EST
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TORONTO Dec 14 (Reuters) - The Toronto Stock Exchange's main index was lower but off early lows on Friday morning as metal prices tumbled and U.S. data stoked fears of inflation.

Shares of raw materials producers have fallen sharply this week, and headed down another 1.2 percent in morning trade as prices for key metals such as gold and copper slipped.

Teck Cominco Ltd TCKb.TO, the major zinc and copper producer, was among the biggest weighted losers, down C$1.14 at C$35.18.

The heavyweight financial sector also retreated, down 0.7 percent, as investors digested a bigger-than-expected rise in U.S. consumer prices, data that was seen as reducing the chance of U.S. Federal Reserve interest rate cuts.

The S&P/TSX composite index .GSPTSE was down 56.60 points, or 0.4 percent, at 13,690.75 with seven of its 10 main groups lower.

It dropped 0.45 percent in the previous session, and is now tracking in negative territory for the month of December.

In Canada's oil patch, Petro-Canada PCA.TO joined rivals EnCana ECA.TO and Husky Energy Inc HSE.TO in saying it will boost capital spending next year, earmarking C$5.3 billion as it directs cash to long-term projects. For details, see: [nN12441720]

Shares of Petro-Canada dropped 34 Canadian cents to C$51.56 after UBS cut its price target for PetroCan stock to C$65 from C$70.

Elsewhere, Transat A.T. Inc TRZb.TO plunged C$3.04 to C$36.60 after the parent of airline Air Transat said its fourth-quarter profit was hit by a writedown on asset-backed commercial paper. For details, see: [nN14292291]

A plan to restructure the Canadian asset-backed commercial paper sector is due to be announced later on Friday, although it's not expected to give investors immediate access to money frozen during the credit crunch in the summer. ($1=$1.02 Canadian) (Reporting by Jonathan Spicer; Editing by Peter Galloway)