February 29, 2008 / 4:13 PM / 10 years ago

UPDATE 1-Toronto stocks yanked lower by resources, banks

(Updates stock movement and adds details, quotes)

TORONTO, Feb 29 (Reuters) - The Toronto Stock Exchange’s main index was sharply lower on Friday morning, pulled down by declines in resource and banking shares and deepening worries over the health of the U.S. economy.

The oil and gas group retreated 1.9 percent as the price of oil eased back from the inflation-adjusted record high it had reached in the previous session. On Bay Street, Canadian Natural Resources (CNQ.TO) slid C$1.79, or 2.4 percent, to C$73.41, and Suncor Energy (SU.TO) fell C$2.30, or 2.2 percent, to C$101.55.

The materials sector, home to natural resource shares, was also caught in the downward momentum. The group was down 2.3 percent as the price of gold fell back from the historic high over $975 an ounce hit earlier in the day. Agnico-Eagle Mines (AEM.TO) shed C$2.16, or 3.2 percent, to C$66.37, and Teck Cominco TCKb.TO was off C$1.90, or 4.6 percent, at C$39.29.

The financial sector, the largest on the index, was down 1.1 percent, weighed down by Bank of Montreal (BMO.TO), which fell amid a report that it has “signaled” it may withdraw from the restructuring of Canada’s nonbank asset-backed commercial paper market. BMO was down C$1.32, or 2.5 percent, at C$51.03.

Royal Bank of Canada (RY.TO) shed 29 Canadian cents, or 0.6 percent, to C$49.83 after Canada’s biggest bank reported a drop in profit on writedowns of various U.S. securities, a climbing Canadian dollar, and gains seen in the year-earlier quarter that were not repeated.

The S&P/TSX composite index .GSPTSE was down 222.05 points, or 1.6 percent, at 13,651.84 with all of its 10 main sectors in negative territory.

“The financials, give or take, are about one-third of the TSX, and there keeps being these continual surprises and black-box things coming out,” said Andrew Martyn, portfolio manager at Davis-Rea.

“I think overall, the question that arises is that if Canadians are looking at what’s going on in the U.S. banking situation and what’s going on in Canada, Canada is very different... However, all Canadian banks have a strategy of expanding internationally and the question is how much of their international will become problematic.”

The Toronto benchmark also took its cue from markets south of the border, where stocks were rattled by heightened worries of a U.S. recession amid disappointing quarterly earnings and data that showed U.S. Midwest business activity contracted sharply in February.

Research In Motion RIM.TO was down C$2.15, or 2 percent, at C$104.37, while the tech sector gave up 1.8 percent. The consumer discretionary group slid 2.1 percent, with Magna International MGa.TO off C$3.12, or 4.1 percent, at C$72.88.

$1=$0.98 Canadian Reporting by Leah Schnurr; Editing by Peter Galloway

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