September 15, 2008 / 3:36 PM / in 9 years

UPDATE 2-Toronto stocks off 1.8 pct amid financial worries

* Energy sector slips with oil price on U.S. demand worry

* Gold rises on safe-haven buying; base metals slump

* Bank of Canada says will provide liquidity as required (Adds details, updates to late morning)

TORONTO, Sept 15 (Reuters) - The Toronto Stock Exchange’s main index was down more than 225 points late on Monday morning, rattled by the bankruptcy filing of Wall Street’s Lehman Brothers Holdings Inc LEH.N and worries over other big financial institutions.

The financial services sector, which accounts for about a quarter of the index’s total weight, was down 1.2 percent -- though up from earlier lows -- with Canadian Imperial Bank of Commerce (CM.TO) down 3.1 percent at C$62.19.

Anxiety over the vulnerable U.S. financial sector heightened on news of the the Lehman filing See [ID:nN13574113] and a deal for Merrill Lynch MER.N to be taken over by Bank of America Corp (BAC.N).

The U.S. Federal Reserve said that it would aid the battered financial industry by accepting equities as collateral for emergency loans, and investors awaited American International Group Inc (AIG.N) to announce a survival plan. See [ID:nN15519385.

“People are fearful,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier. “There’s a great deal of uncertainty out there. Much more than normal.”

The Bank of Canada said on Monday it will provide liquidity as required to shore up financial markets spooked by the bankruptcy filing of Lehman and the sale of Merrill Lynch. See [ID:nN15409977].

As well, Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, said the country’s financial institutions are healthy and it has no plans for special measures to help banks cope with the world financial crisis. See [ID:nOTW000130].

By late Monday morning, the S&P/TSX composite index .GSPTSE was down 227.29 points, or 1.78 percent, at 12,542.29, with nine of its 10 main groups lower. Earlier in the session the benchmark index had shed more than 3 percent.

The heavyweight energy sector dropped 3 percent as oil prices fell to around $97 a barrel on worries over lower U.S. demand and signs that Hurricane Ike had spared key U.S. energy infrastructure in the Gulf of Mexico. See [ID:nSYD347689]. Canadian Natural Resources (CNQ.TO) fell 4.5 percent to C$79.50.

The materials sector fell 1.3 percent as concerns over the fallout from the U.S. credit crisis overcame a rise in gold prices, which climbed on safe-haven buying.

The sector picture was mixed, with Potash Corp of Saskatchewan Inc (POT.TO) up 1 percent at C$173.99, while First Quantum Minerals fell 3.9 percent to C$50.79.

Consumer staples was the only group in positive territory, managing to eke out a 0.2 percent gain.

In company news, Teranet Income Fund TF_u.TO advised its unitholders not to take any immediate action with respect to the formal takeover bid from Borealis Infrastructure Management Inc.

Teranet said it is seeking alternatives and investors should wait for the outcome of that process before making any decisions. See [ID:nBNG283257]. Teranet units slipped 1.5 percent to C$11.30. ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; editing by Rob Wilson)

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