*TSX index opens lower after a 7 percent rally on Friday
*Uncertainty over U.S. bailout package prevails
*Materials stocks rise on higher gold, base metals prices
*Tanganyika Oil jumps after it says in talks with buyer
TORONTO, Sept 22 (Reuters) - The Toronto Stock Exchange’s main index stumbled on Monday morning on weakness in energy and financial shares as investors worried about the effects of the proposed $700 billion U.S. financial bailout plan.
The retreat came after news that the two remaining major U.S. investment banks, Goldman Sachs (GS.N) and Morgan Stanley (MS.N), have sought refuge in the arms of the U.S. Federal Reserve and transformed themselves into bank holding companies to survive the financial storm. [ID:nSP4331] [ID:nN13574113]
On Friday, the Toronto market soared on news if the bailout plan -- making its biggest percentage gain since 1987, rising 7.03 percent to 12,912,99 -- but it had some second thoughts on Monday.
“I would say there’s still a lot of uncertainty out there as to the rescue package,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
“Some may take the view that even a rescue package will not cure the problems out there, and view it as a good time to sell,” he added.
“Others will sit on the fence and say let’s look at the details because the devil are in the details. Is it going to be enough to mitigate the losses the banks have incurred?”
Late on Monday morning, the S&P/TSX composite index .GSPTSE was down 109.49 points, or 0.85 percent, at 12,803.50, with nine of its 10 main groups lower.
The materials group was the lone sector treading above water, up 2.2 percent, on strength in metals prices. Among the gainers in the sector, Agnico-Eagle (AEM.TO) rose 1.7 percent to C$66.08, while Barrick Gold (ABX.TO) 6.5 percent to C$38.87.
The heavily-weighted financial services sector slumped 1.3 percent. But Manulife Financial (MFC.TO) rose 2 percent to C$37.61 after the Globe and Mail newspaper said that Manulife executives met with financial advisers late last week to consider picking up assets from American International Group (AIG.N), a major casualty of the U.S. credit crisis. [ID:nN22226017]
The heavyweight energy sector was down 1.7 percent, even as oil extended gains and rose to $108 a barrel on expectations that a comprehensive U.S. government plan would help shore up confidence in battered financial markets and maintain demand for commodities. [ID:nSYD356880]
In the oil patch, Tanganyika Oil Co Ltd TYK.TO, a top net gainer on the market, rose 30.5 percent to C$22.83 after it said it is in exclusive talks with a potential buyer of the company.
Angiotech Pharmaceuticals ANP.TO ANPI.O said a large financing deal is in jeopardy due to rising costs and slumping royalty revenue payments for its main product, a stent coating. Angiotech tumbled 17.7 percent to C$1.12. ($1=$1.04 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)