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*Financial services shares fall on more credit fears
*Oil and base-metals miners companies rise
*Mega Brands up after quarterly results
TORONTO, Aug 19 (Reuters) - The Toronto Stock Exchange's main index fell on Tuesday morning, pulled lower by financial-services shares as worries over the credit crisis and the U.S. economic outlook resurfaced.
The heavyweight financial-services sector slipped 1.5 percent on a forecast by JPMorgan Securities that U.S. investment bank Lehman Brothers LEH.N will likely take further writedowns [ID:nBNG259145]. Royal Bank of Canada (RY.TO) fell 1.4 percent to C$45.94.
The market fallout from the credit crisis is far from over, said John Kinsey, portfolio manager at Caldwell Securities Ltd.
"People have underestimated the severity of it, the depth and breadth," he said. "It pops its ugly head up and bashes the market."
Underpinning the jitters was a U.S. report showing that underlying inflation is gaining momentum, heightening concerns about the health of the economy. For details, see [ID:nN19145257]]
This added to the bad mood set on Monday after a report suggested the U.S. Treasury may recapitalize mortgage finance giants Fannie Mae FNM.N and Freddie Mac FRE.N. The Treasury said it had no plans to backstop either of the companies.
Industrials and consumer discretionary stocks helped to push the index down. They fell 1.4 percent and 1.0 percent respectively.
At midmorning, the S&P/TSX composite index .GSPTSE was down 42.94 points, or 0.3 percent, at 13.076.43, with most of its 10 main groups lower.
The key energy sector rose 0.8 percent despite weakness in the price of oil. Petro-Canada PCA.TO was up 0.4 percent at C$45.40.
Early activity in the resource-heavy materials sector was choppy, but found its way up 0.9 percent, as some base metals prices rose.
Toymaker Mega Brands Inc MB.TO climbed 9.4 percent to C$2.90 after it said it had reached an agreement with its insurers for the recovery of $9.3 million related to the settlement of lawsuits over children swallowing magnets, and said it will record the amount in its third-quarter results.
Mega Brands reported a second-quarter loss, as lower sales and more product recall charges hurt results. [ID:nN19520038] ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)