Toronto stocks hammered as oil, gold retreat

Wed Mar 19, 2008 5:38pm EDT
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By Leah Schnurr

TORONTO (Reuters) - A sharp drop by resource issues hammered the Toronto Stock Exchange's main index on Wednesday as commodity prices dropped on concerns that demand could be weakened by the U.S. economic slowdown.

In the worst day for the TSX in almost two months, the benchmark index plunged more than 400 points. Resource companies took the biggest hit as oil and gold prices, which have enjoyed a string of record highs over recent months, fell sharply.

Among resource stocks, Suncor Energy SU.TO was down C$6.25, or 6.1 percent, at C$96.67, while Inmet Mining IMN.TO gave up C$5.89, or 7.3 percent, to C$74.61. Potash Corp of Saskatchewan POT.TO was the biggest net decliner by weight, shedding C$12.32, or 7.7 percent, to C$147.05.

Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management Ltd. in Calgary, said the optimism that the TSX saw on Tuesday over the U.S. Federal Reserve's 75 basis point rate cut had evaporated as it was less than the full percentage point that some investors had expected.

"Today (investors) decided that it wasn't enough, and without that being enough, they figured that that means demand for metals and materials isn't going to be quite so strong," said Kerkovius. "So, today (there's) a big selloff in the commodity complex and down go the markets."

The S&P/TSX composite index .GSPTSE closed down 427.32 points, or 3.25 percent, at 12,709.38 with all 10 of its main sectors falling. It was the largest one-day decline since a plunge of more than 600 points in mid-January.

The materials sector posted the biggest loss, giving up 6.1 percent, while its subindexes of gold producers and base metals miners sagged 5 percent and 6.2 percent respectively.

Gold prices in particular were slammed as investors moved out of the safe haven, sending the price of bullion down to $944.20 an ounce. Other metals followed gold's lead, while crude oil prices sagged $4.94 to $104.48 a barrel.   Continued...

<p>A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch</p>