UPDATE 1-Toronto stocks drop on soft oil, bank worries

Tue Jul 22, 2008 11:47am EDT
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*Energy shares follow oil prices lower

*Financial shares rattled by Wachovia results

*Potash Corp slips on strike threat

TORONTO, July 22 (Reuters) - Toronto stocks dropped 1.5 percent on Tuesday as soft energy prices, weak results from one of the country's biggest railway companies and bleak news from a big U.S. financial institution weighed on the market.

Canada's heavily weighted financial shares dropped 1.7 percent after Wachovia Corp WB.N posted an $8.86 billion quarterly loss, slashed its dividend and announced thousands of job cuts.

Wachovia's results, highlighting the damage done by the U.S. mortgage crisis, damped hopes that the U.S. bank sector was stabilizing, after Citigroup Inc, Wells Fargo and other banks reported stronger-than-expected results earlier in the week.

Bank of Nova Scotia (BNS.TO: Quote) dropped 0.3 percent and Sun Life Financial (SLF.TO: Quote) slipped 1.4 percent.

The vulnerability of Canadian companies to a weakening U.S. economy were highlighted by quarterly results posted by Canadian Pacific Railway (CP.TO: Quote). It reported a nearly 40 percent drop in earnings as a slowing U.S. economy held back shipments and fuel prices surged.   Continued...