Toronto stocks under pressure as commodities slip

Fri Apr 18, 2008 9:07am EDT
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TORONTO, April 18 (Reuters) - The Toronto Stock Exchange's main index was set to decline on Friday as a broad fall in key commodities looked to undermine a recent surge in Canadian stocks.

Profit-taking and a rebounding U.S. dollar were the culprits as gold, copper and other metals tumbled, dampening the prospects for miners in the TSX materials sector.

Natural gas was down, and U.S. crude oil tumbled more than $2 a barrel as worries grew over a downturn in energy-hungry China, whose stock market slid on Friday.

The energy sector, which represents some 30 percent of the overall TSX, typically reacts to wide swings in the underlying commodities.

"Oil and resources may have some volatility short term, but longer term, people are very comfortable that they will do reasonably well," said Paul Harris, portfolio manager at Avenue Investment Management.

U.S. stock futures -- another bellwether for the Canadian index -- pointed higher, however, after Google's GOOG.O quarterly results beat estimates.

Canadian analysts say the mood going into first-quarter corporate reporting period will hinge on results from the TSX financial sector, which has been hurt by the global credit crisis.

Investors will want to be "overweight" in financial stocks as soon as there is an indication the debt crunch is ending, Harris said.

The S&P/TSX composite index .GSPTSE starts the day at 14,115.50 after edging up 16.02 points, or 0.1 percent, in the previous session.

The index is up 2 percent on the year and at its highest level since November following a commodities-driven rise.

($1=$1.01 Canadian) (Reporting by Jonathan Spicer; Editing by Scott Anderson)