January 28, 2008 / 3:51 PM / in 10 years

UPDATE 2-Toronto stocks fall on U.S. economic worries

(Adds details, comments)

TORONTO, Jan 28 (Reuters) - Toronto’s main stock market fell on Monday as commodity prices weakened on worries over the health of the U.S. economy in cautious trading ahead of a U.S. interest rate decision later in the week.

By mid-morning, the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE fell 59.13 points, or 0.5 percent, to 12,835.70, after earlier touching a low of 12,774.75.

This followed a volatile five-day performance last week when the index vacillated more than 1,200 points before ending up about 1.2 percent.

“We’re seeing a continuation of the concerns with respect to the credit markets and the hangover that that’s going to have over the next couple of quarters,” said Michael Sprung, president at Sprung and Co Investment Counsel.

“Going forward, the markets are going to be extremely volatile.”

Eight of the TSX index’s main groups fell, led by a 1.1 percent dip in energy shares and a 1.1 percent drop in the telecommunications sector. But materials shares were flat as gold issues rose on a firm price for the precious metal.

Energy shares fell as crude oil prices slid 1.6 percent to $89.28 a barrel on profit-taking spurred by worries over the health of the global economy.

Among the energy issues falling were Suncor Energy (SU.TO) which dropped C$2.13 to C$87.95 and Canadian Natural Resources (CNQ.TO) which was off C$1.90 at C$61.58.

Telecommunications issues were led lower by heavyweight BCE Inc (BCE.TO), which was off C$1.13 at C$35.16 as investors fretted that its takeover could be delayed or fall apart.

Gold shares propped up the resource-heavy materials group as the price for spot gold held firm around $921 an ounce amid a weak U.S. dollar and production issues in South Africa.

Barrick Gold (ABX.TO), the biggest producer in the world, added 24 Canadian cents to C$52.73 and Kinross Gold (K.TO) rose 75 Canadian cents to C$23.03.

Investors were cautious ahead of the U.S. Federal Reserve’s decision on interest rates later in the week.

The Fed surprised investors last week with an emergency rate cut of 75 basis points, shortly before the Bank of Canada cut its key lending rate by 25 basis points.

More U.S. rate cuts are expected this week, with wide debate over whether it will be 25 or 50 basis points. ($1=$1.01 Canadian) (Reporting by Scott Anderson; Editing by Bernadette Baum)

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