CANADA STOCKS-Oil price fall sparks TSX dive

Thu May 21, 2009 10:54am EDT
 
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* TSX down 2.52 percent at 9,974.64,

* Energy sector, down 3.8 pct, leads TSX lower

* Oil pulls back from 6-month high (Adds details, quotes)

By Jennifer Kwan

TORONTO, May 21 (Reuters) - Toronto's main stock market index fell sharply on Thursday morning after rallying for two days as declining oil prices pulled down energy shares.

A drop in the oil price to below $61 a barrel from the six-month peak it hit in the previous session was the main culprit dragging the index lower. [ID:nSIN101873] The energy sector fell 3.8 percent with EnCana Corp (ECA.TO: Quote) down 4.5 percent to C$59.47. Canadian Natural Resources (CNQ.TO: Quote) fell 6 percent to C$59.79.

The pullback is to be expected following an equities rally over the past two months or so, said Gareth Watson, Canadian equity advisor, Portfolio Advisory Group, ScotiaMcLeod.

"It's a market that is ahead of itself. Oil prices are ahead of itself, and expectations of a recovery that are too optimistic," Watson said.

"Generally, it's a market that has been pushed up by momentum than fundamentals in the past two months."   Continued...