August 26, 2008 / 3:24 PM / 9 years ago

REFILE-UPDATE 1-Toronto stocks flat as financials sag

(Refiles to fix typo in headline)

* Financials drag as energy and materials rise

* Bank of Montreal sags after quarterly results

* Maple Leaf Foods slumps on meat recall (Adds details)

TORONTO, Aug 26 (Reuters) - The Toronto Stock Exchange’s main index was flat in choppy trading on Tuesday morning, held back by sagging financials, as investors eyed quarterly results from the country’s big banks.

The financial services sector slipped 1 percent with Bank of Montreal (BMO.TO), the first to report earnings, down 1.5 percent at C$43.38 on softer than expected earnings.

The market will focus on the financials sector through the week for clues on how hard Canadian banks have been hit by the U.S. credit crisis, said Julie Brough, vice-president at Morgan Meighen & Associates.

“It’s the U.S. banks that have everyone on edge and until that is settled I don’t think we’ll be able to get great traction,” said Brough.

She added investors will also closely watch bank results for any surprises on the domestic side.

“If we start seeing it come through in domestic banking, that’s when you’ll see a bigger squeeze put on the banks,” said Brough.

At midmorning, the S&P/TSX composite index .GSPTSE was up 6.39 points, or 0.05 percent, at 13,295.35, with five of the 10 main groups higher, after bobbing between black and red.

Bank of Montreal, Canada’s fourth largest bank, said third-quarter net profit slipped 21 percent, as provisions for credit losses surged and it took charges for the declining value of certain credit-related securities.

BMO said it earned C$521 million ($499 million), or 98 Canadian cents a share, in the quarter, down from C$660 million, or C$1.28 a share, a year earlier, when it took a big commodities-trading loss.

Results from Bank of Nova Scotia (BNS.TO) are also expected on Tuesday.

The consumer staples sector also weighed on the benchmark index, falling 1.3 percent as Maple Leaf Foods (MFI.TO), sank 7.2 percent to C$8.17, amid a food poisoning outbreak linked to one of its meat processing plants. Health officials said on Monday the number of deaths connected to the listeriosis outbreak had risen to 12 out of 26 confirmed cases.

The heavyweight energy and materials sectors cushioned the market’s retreat, rising 0.7 percent and 0.3 percent, respectively. Both sectors benefited from a rebound in underlying commodity prices.

Oil rose to above $116 a barrel as concerns emerged about possible supply disruptions if Hurricane Gustav swing into energy-producing regions of the Gulf of Mexico. EnCana Corp (ECA.TO) rose 1.8 percent to C$76.52.

Miners were helped by firmer gold prices. Goldcorp (G.TO) added 1.1 percent to C$35.53.

Elsewhere, soft drink maker Cott Corp (BCB.TO) tumbled 15.9 percent to C$2.17 after it lowered its 2008 outlook, citing declining volumes and rising packaging costs. ($1=$1.04 Canadian) (Reporting by Jennifer Kwan; editing by Rob Wilson)

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