January 22, 2009 / 3:12 PM / 9 years ago

CANADA STOCKS-TSX drops sharply, energy leads fall

* Lower oil prices play key role in Toronto index slide

* Weak economic data weighs on investor sentiment

* Drop follows Wednesday’s 3 percent gain (Adds details)

By Frank Pingue

TORONTO, Jan 22 (Reuters) - Toronto’s main stock index was sharply lower on Thursday morning as weaker oil prices weighed on the resource-heavy index while the latest batch of economic data showed further signs of a deteriorating Canadian economy.

The energy sector led the broad decline as the price of oil, a key Canadian export, turned lower and hit the shares of Canadian oil companies.

Also, data showed retail sales suffered their steepest drop in nearly 11 years in November, another in a long line of economic reports documenting the economy’s downward spiral.

Among the key stocks falling were EnCana Corp (ECA.TO), Canada’s biggest energy company, which was down 3 percent at C$53.55, and insurer Manulife Financial (MFC.TO), which fell 6.5 percent to to C$20.23.

“We had a runup yesterday in the market and we are just reversing that because the reality is there is still a lot of bad news to come out,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

“There are so many things weighing, but ultimately it depends on consumers. And consumer confidence is low because they are hearing all this bad news about the financial services sector, and the economy is dead in the water until consumers become more positive.”

At 10:00 a.m. (1500 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 158.36 points, or 1.81 percent, at 8,599.53. Earlier, it had fallen as low as 8,541.61, for a loss of 2.5 percent.

All 10 of the TSX’s 10 sectors were lower.

$1=$1.27 Canadian Reporting by Frank Pingue; editing by Peter Galloway

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