4 Min Read
* U.S. lawmakers reject $700 bln plan, raising uncertainty
* Energy sector tumbles 12.2 pct as oil slides below $96
* Financial services drop 6.1 pct as bank jitters spread (Adds analyst comments, details, updates figures)
By Jennifer Kwan
TORONTO, Sept 29 (Reuters) - The Toronto Stock Exchange's main index tumbled more than 7 percent on Monday, the most in eight years, as U.S. lawmakers rejected a proposed $700 billion bailout of the financial services sector.
As the U.S. House voted to reject on the Wall Street rescue plan, concerns mounted that the fallout from the crisis in the United States was spreading rapidly around the globe.
Although critics said the package would have been too little, too late, the House vote fanned fears that the global economy was headed for a sharp downturn. Economists and politicians had warned over the weekend of dire consequences if a rescue plan was not put into place immediately.
Fueling the carnage on the market was a $10 drop in the price of oil on rising concerns of a global slowdown, sending the heavily weighted energy sector down more than 12 percent. [ID:nN29389346]
"This is yet another Black Monday," said John Ing, president at Maison Placements Canada.
Shortly before 3:30 p.m., the S&P/TSX composite index .GSPTSE was down 926.25 points, or 7.64 percent, at 11,199.75, for the biggest intraday drop since October 2000. In the span of about five minutes while the U.S. vote was being tallied, 300 points were erased from the index.
The TSX had recovered some lost ground in the afternoon but plunged anew a few minutes later after the final tally showed the rescue package was indeed rejected. For links to more stories, see [ID:nN22402709].
"The first thing that all the people did was hit the sell button," said Andrew Martyn, portfolio manager at Davis-Rea. "Uncertainty is not the friend of this market."
He added: "In the meantime you don't have a lot of buyers who say, hey, this looks cheap let's jump in."
For most of the day, markets were also on tenterhooks as European authorities set up several bank rescue operations on Monday, including a plan to partly nationalize Fortis NV FOR.BR [ID:nLS357697]. In the United States, Citigroup Inc (C.N), the largest U.S. bank, moved to acquire the bulk of Wachovia Corp WB.N. [ID:nLT436737]
As part of co-ordinated action by the world's major central banks, the Bank of Canada increased the amount of its swap facility with the U.S. Federal Reserve on Monday to US$30 billion from US$10 billion. [ID:TOR003487]
"What's driving the Canadian market today is fear that this economic slowdown is going to be more global and more pronounced than people were previously giving credit to," said Michael Sprung, president of Sprung & Co. Investment Counsel, before the vote took place.
"It's fear in the form that the bailout package in the U.S. is going to be insufficient to stem a global slowdown and, possibly, a global recession."
The heavily weighted energy and materials groups slumped 12.2 percent and 6.2 percent, respectively, as oil plunged below $96 a barrel amid fears of a global economic downturn.
"If we are heading toward a pronounced global slowdown, then energy consumption is going to be dramatically reduced," said Sprung.
Canadian Natural Resources (CNQ.TO), a top net loser, shed 18.6 percent to C$65.55.
The financial services sector was down 6.1 percent with Manulife Financial (MFC.TO) falling 3.9 percent to C$36.34.
The insurer's chief executive told analysts the firm is in "an excellent position" to weather the financial-market turmoil, compared with industry peers, because it has modest debt levels and a stable deposit base. [ID:nN29370501]
$1=$1.04 Canadian Additional reporting by Scott Anderson and Wojtek Dabrowski