January 15, 2008 / 5:33 PM / 10 years ago

UPDATE 2-Toronto stocks dive on bleak bank news

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By Scott Anderson

TORONTO, Jan 15 (Reuters) - Toronto’s main stock market index dived to its lowest level in more than three weeks on Tuesday amid worries over North American financial shares and falling commodity prices.

By noon, the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 339.96 points, or 2.5 percent, at 13,358.32.

All 10 of the TSX index’s main groups were lower led by a 3.3 percent fall in the influential energy group and a 2.2 percent dip in the heavily weighted financial group. The resource-heavy materials group was down 3.6 percent.

These three groups account for more than three-quarters of the overall market.

Investors bailed out of banking shares amid more bad news on both sides of the border.

Canadian Imperial Bank of Commerce (CM.TO) said on Monday it would take almost $2.5 billion in pretax writedowns related to the U.S. subprime mortgage crisis, and raise about C$2.75 billion ($2.70 billion) in stock sales to rebuild its balance sheet.

CIBC, Canada’s fifth-largest bank, also said it will take a $2 billion pretax writedown in its financial first quarter related to the subprime mortgage hedge protection it bought from ACA Financial Guaranty Corp.

As well, it plans to sell chunks of shares to institutional investors at C$65.26 and C$67.05 per share. Shares of CIBC dropped C$1.86 to C$70.21.

Meanwhile, Citigroup Inc (C.N) said a huge writedown for mortgages triggered a nearly $10 billion quarterly loss, about twice analysts’ estimates, and that it was raising $14.5 billion, slashing its dividend and cutting 4,200 jobs.

“The combination of both the CIBC and CitiGroup announcements let people know that this whole subprime business is not behind us yet,” said Brian Pow, vice-president of research at Acumen Capital Partners in Calgary, Alberta.

“We are somewhere in the first half of what could be an extended game.”

Pow said many people were cautious ahead of an interest rate decision from the U.S. Federal Reserve later in the month.

All of the country’s biggest banks were also lower including Bank of Nova Scotia (BNS.TO) which slipped C$1.30 to C$47.10 and Toronto-Dominion Bank (TD.TO) which was off 98 Canadian cents at C$65.46.

Energy shares dropped as the price for crude oil retreated 2.6 percent to $91.71 a barrel on worries over a recession in the United States and expectations of a rise in U.S. inventories.

Canadian Natural Resources (CNQ.TO) fell C$3.19 to C$70.30 and Talisman Energy TLM.TO was off C$1.10 at C$18.26.

Talisman said it will cut spending by 6 percent to C$4.38 billion ($4.34 billion) this year and predicts a slight increase in output.

Talisman plans to trim North American spending by about C$1 billion, keep investment flat in the North Sea and increase its outlay in Southeast Asia and Norway.

Material shares dropped as the price for key base metals including copper and zinc fell on worries over a global economic slowdown and falling demand in China and the United States.

Teck Cominco TCKb.TO dropped C$1.15 to C$34.10 and Inmet Mining IMN.TO was down C$2.51 to C$72.06.

Gold shares retreated from earlier highs as the price for the precious slipped under the key $900 an ounce level.

Barrick Gold (ABX.TO), one of the biggest producers in the world, dropped C$1.27 to C$51.09, while Agnico-Eagle Mines (AEM.TO) was down C$1.07 at C$60.38. ($1=$1.02 Canadian) (Reporting by Scott Anderson; Editing by Bernadette Baum)

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