February 23, 2009 / 10:28 PM / in 9 years

CANADA STOCKS-TSX falls to lowest close since Oct '03

* TSX tumbles to lowest level since Oct 03

* Selloff follows 1 percent rally at open

* Data, commodities and U.S. banks blamed for skid (Adds details)

By Frank Pingue

TORONTO, Feb 23 (Reuters) - Toronto’s main stock index fell nearly 4 percent to its lowest closing level in more than five years on Monday, hit by lower commodity prices, weak economic data and nagging concerns about U.S. banks.

All 10 TSX sectors finished lower in a decline headlined by a 5 percent drop in the big energy sector as persistent fears of a prolonged global slowdown weighed on oil prices.

EnCana Corp (ECA.TO) led the energy group lower as its shares tumbled 7.2 percent to C$44.78, followed by TransCanada Corp (TRP.TO), which ended down 5.9 percent at C$30.10.

The slide in oil prices followed weak Canadian retail sales data for December that puts pressure on the Bank of Canada to cut interest rates below the current 50-year low of 1 percent at its next policy announcement date on March 3.

“While it’s not a significant data point in and of itself, it just confirms what many investors have been fearing, that this recession is much deeper and much longer than what we had believed a few months ago,” said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.

“You also had U.S. indices like the Dow Jones and S&P 500 trading at their lowest levels in over 10 years and that is another factor that really depresses sentiment.”

Lingering uncertainty about U.S. government actions to shore up beleaguered banks banks rattled equities in the United States and the selling spilled over into Canada.

The S&P/TSX composite index .GSPTSE closed down 302.32 points, or 3.8 percent, at 7,647.67. The index had risen 1 percent just after the open.

Fears that some U.S. banks could be nationalized continued to drag on investor sentiment in the week’s first session. And talk of a new government stake in Citigroup Inc (C.N) did little to calm worries that the bank would not be able to absorb soaring losses in a recession [ID:nN23336737]

The concerns spilled into Canada and stripped the heavily weighted financial index of 3.56 percent of its value, making it a key driver of the TSX’s second straight selloff.

Shares of Royal Bank of Canada (RY.TO) dropped 4.6 percent to C$25.82, while Toronto-Dominion Bank (TD.TO) fell 1.35 percent to C$32.80.

Insurer Manulife Financial (MFC.TO), another major presence on the financial index, dropped 2.6 percent to C$12.53 after it denied speculation that it would issue common stock.

The TSX rallied at the start of the session as oil prices rose and investors took the report that the U.S. government might take a common-stock stake in Citigroup a sign that it was ready to prevent further paralysis of the financial system.

But that notion faded as the session wore on because of uncertainty about the plan, and the market fell back to being concerned about the health of banks and bank nationalization.

$1=$1.25 Canadian Editing by Peter Galloway; Editing by Peter Galloway

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