CANADA STOCKS-TSX falls as China fears hit commodities

Wed Jan 20, 2010 10:45am EST
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* S&P/TSX composite down 1.32 percent at 11,609.82

* Mining, energy shares lead TSX lower

* Barrick Gold, Suncor Energy lead decliners (Adds details, quotes)

By Claire Sibonney

TORONTO, Jan 20 (Reuters) - Toronto's main stock index extended its fall on Wednesday morning, with materials and energy shares taking the biggest hit as commodity prices fell on fresh evidence of tightening credit in China.

In addition to dropping on concern about demand as credit tightens in China, oil and metal prices were weighed down by a a stronger U.S. dollar, which hit a five-month high against the euro. A higher greenback makes commodities, most of which are priced in U.S. dollars, more expensive, thereby reducing demand.

"China is taking some of the stimulus off, which makes sense, because last year they lent double what they lent in 2008," said Laura Lau, senior portfolio manager at Sentry Select Capital Corp. "They are starting to see inflation."

Two of the biggest drags on the index were Barrick Gold Corp (ABX.TO: Quote), the world's largest gold producer, and Suncor Energy Inc (SU.TO: Quote), Canada's biggest oil company. Barrick was down 4.08 percent at C$39.24, and Suncor fell 1.62 percent to C$36.33.

Gold prices gave way to unfavorable currency fundamentals and oil slipped below $78 a barrel after China ordered some big banks to curb lending, intensifying its efforts to prevent the world's third-largest economy from overheating. [GOL/][O/R]   Continued...