UPDATE 4-Toronto stocks plunge as Lehman implodes, oil sags

Mon Sep 15, 2008 5:08pm EDT
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* Toronto stocks drop more than 500 points

* Failure of Lehman, weaker oil send investors fleeing

* Heavyweight energy sector sheds 6 percent (Adds comments, details)

By Wojtek Dabrowski

TORONTO, Sept 15 (Reuters) - The main index of the Toronto Stock Exchange's plunged 4 percent on Monday in a broad selloff triggered by the failure of Wall Street investment bank Lehman Brothers LEH.N and a big drop in the price of oil.

The bankruptcy protection filing by Lehman, as well as the sale of Merrill Lynch MER.N and the fight for survival unfolding at U.S. insurance giant American International Group (AIG.N: Quote), sent investors fleeing from every sector of the Toronto market.

"The TSX is being hit in a big way by what's happening in the U.S. financial industry," said Elvis Picardo, an independent strategist based in Vancouver. "There's a contagion effect at play here."

U.S. crude CLc1 fell $5.47, or 5.41 percent, to settle at $95.71 a barrel, partly in reaction to the turmoil but also because of early signs that Hurricane Ike had spared key U.S. energy infrastructure along the Gulf of Mexico.

The S&P/TSX composite index .GSPTSE fell 515.55 points, or 4.04 percent, to close at 12,254.03. It was the biggest drop since late January.   Continued...