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*TSX index ends choppy session little changed
*Financials dragged by worries of credit crunch fallout
*Gold producers rise with bullion price
By Leah Schnurr
TORONTO, Aug 18 (Reuters) - The Toronto Stock Exchange's main index finished slightly higher on Monday as a rise in resource shares offset nagging fears of more fallout from the credit crunch.
In choppy action, the materials sector was lifted 2 percent by gold producers, which rose along with bullion prices and helped to put a floor under the benchmark index.
Gold climbed to end just under $800 an ounce while the U.S. dollar weakened. Traders said Monday's action could be the beginning of a bounce back from recent declines for gold prices. Goldcorp (G.TO) was up 3.8 percent at C$32.35, while Barrick Gold (ABX.TO) added 3.3 percent to C$35.06.
The S&P/TSX composite index .GSPTSE closed up 22.67 points, or 0.17 percent, at 13,119.37 after climbing by more than 1 percent earlier in the day. Of its 10 main sectors, half were higher.
The financial-services sector fell 1 percent, tripped up by sliding bank shares in the United States amid anxiety over the possibility of more losses stemming from the U.S. mortgage crisis.
"I think the States is where the biggest problem does come from," said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc, in Vancouver.
"There's still just a lot to go and investors don't know where turn or what theory to believe because we've had so much of it - it's like having an avalanche come at you."
Worries were stoked by a Barron's report that suggested the U.S. Treasury may recapitalize mortgage finance giants Fannie Mae FNM.N and Freddie Mac FRE.N. The Treasury Department said it had no plans to backstop either of the companies. For details, see: [nN18494933].
Shares of Corel Corp bounced higher after falling earlier in the day after the software developer said its majority shareholder had withdrawn its offer to buy out the rest of the company. Corel rose 4.5 percent to C$10.04. See: [ID:nN18443407].
The index has fallen 3.5 percent for August so far and is down more than 13 percent from the record high it reached in June, pushing it further into correction territory as the heavyweight resource sectors have eased.
Joe Ismail, technical analyst at Maison Placements Canada, said the market has become oversold, making a bounce-back likely in the short term.
Ismail added that investors are waiting for quarterly results from the big Canadian banks, which are due next week, to provide direction.
Market volume was 291 million shares worth C$4.8 billion. Decliners outpaced advancers 786 to 672. The blue chip S&P/TSX 60 index .TSE60 closed up 1.90 point, or 0.24 percent, at 782.90.
In New York, stocks were dragged lower by the banks with the Dow Jones industrial average .DJI down 180.51 points, or 1.55 percent, at 11,479.39, and the Nasdaq Composite Index .IXIC down 35.54 points, or 1.45 percent, 2,416.98. ($1=$1.06 Canadian) (Editing by Peter Galloway)