CANADA STOCKS-TSX falls 2 pct, rattled by global bank woes

Tue Jan 20, 2009 10:33am EST
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* Key Toronto index falls as much as 2.9 percent

* Financial and energy shares spearhead index's drop

* TSX briefly held in positive territory at open (Adds details)

By Frank Pingue

TORONTO, Jan 20 (Reuters) - Toronto's main stock index was 2 percent lower at midmorning on Tuesday as continuing fears about the state of the world banking system rattled financial shares.

The index's drop was also being driven by weakness in the energy group, which led all sectors with a 4.78 percent fall after oil dropped by more than $3 a barrel early in the day.

Canadian bank shares headlined the index's drop after news on Monday that Royal Bank of Scotland RBS.L posted the biggest loss in British corporate history, a development that heightened fears for North American banks.

Toronto's financial index was down 3 percent.

"You only have to look around the world and it's a foretaste of what is to come," said John Ing, president of Maison Placements Canada. "The financials had been particularly week and it looks like we are going to get a retest of the lows so they are dragging down the market."   Continued...