CANADA STOCKS-Italy triggers biggest TSX 1-day drop in a month

Wed Nov 9, 2011 5:04pm EST
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 * TSX down 332.63 pts, or 2.7 pct, at 12,156.22
 * Italian bond yields hit 7 pct, sparking fears
 * Energy, materials sectors lead market lower
 * Index has biggest one-day drop since Oct. 3
 (Adds further analyst comment, details)
 By Jon Cook
 TORONTO, Nov 9 (Reuters) - Canadian stocks had their
biggest one-day drop in a month on Wednesday as a spike in
Italian bond yields sparked fears that Europe's debt crisis has
entered a dangerous new phase that will threaten the global
 Global stocks and commodity prices took a pounding after
Italy's 10-year bond yields rose above the precarious 7-percent
level, which had previously caused other European Union
countries such as Greece, Ireland and Portugal to seek
bailouts. [MKTS/GLOB]
 Investors are concerned that at those levels Italy will be
unable to continue to pay its more than 2 trillion euro debt
burden and the country could be too big for euro zone and
international lenders to bailout.
 "It's a severe risk off day," said Patricia Mohr, a
commodity market specialist at Scotia Capital. "When this
concern intensifies, investors have been shifting out of
equities and commodity futures positions into cash and the
security of U.S. Treasury securities."
 The Toronto Stock Exchange's S&P/TSX composite index
.GSPTSE plunged 332.63 points, or 2.7 percent, to 12,156.22.
It was the exchange's worst one-day performance since Oct. 3.
 Energy stocks led the Canadian market lower, falling more
than 4 percent. The biggest drag was Suncor Energy Inc SU.TO,
which plunged 5.6 percent to C$31.44.
 The heavily weighted materials sector dropped 3 percent,
led by Potash Corp POT.TO, which slid 4 percent to C$47.63.
 Its base metals mining subsector dropped heavily, falling
nearly 8 percent.
 The biggest loser among base metal producers was First
Quantum Minerals FM.TO, whose shares fell more than 14
percent to C$19.76 a day after the Vancouver-based miner
lowered its full-year production outlook to reflect a dip in
quarterly production. [ID:nL4E7M83WT]
 Even gold shares, a traditional safe haven, did poorly.
After hitting a near two-month high at the start the week, the
Canadian subindex of gold mining stocks fell nearly 2 percent.
 Despite limited direct exposure to European government debt
holdings, Canadian financial stocks still fell 2.3 percent, led
down by Royal Bank of Canada RY.TO, which fell 2.8 percent to
 "It's fear of contagion," said John Kinsey, portfolio
manager at Caldwell Securities Ltd. "They're the third-largest
economy in Europe and this is really where the fear factor
comes in. It's not just Greece with 10 million people."
 "If (the EU) economy goes down that affects China because
they were a big importer from China and people are worried the
Chinese economy will slow."
 Top U.S. bond manager PIMCO, one of the world's largest
holders of Italian sovereign debt, said Italy's debt woes
represented "a new, even more dangerous phase in Europe's debt
crisis." [ID:nN1E7A8104]
 (Editing by Jeffrey Hodgson)