TSX dragged down by financial worries
By Leah Schnurr
TORONTO (Reuters) - The Toronto Stock Exchange's main index ended lower on Wednesday in a volatile session as worries over more trouble in the financial sector undercut a brief rally after another U.S. interest rate cut.
The index had bounced higher immediately after the U.S. Federal Reserve announced a highly anticipated 50-basis-point cut and left the door open to more.
But the Toronto benchmark's rally soon evaporated with stocks falling broadly, led down by the banking sector after a report that bond insurers could be downgraded.
Bond insurers were used by some companies to hedge investments in now-faltering subprime mortgage securities, but markets have become nervous that these insurers now could also fail.
"Probably the most important thing is we still haven't got this monoline insurance companies (problem) solved ... that's the key problem right now I think the market is looking at," said Sal Masionis, stockbroker at Brant Securities.
The S&P/TSX composite index .GSPTSE closed down 48.23 points, or 0.37 percent, at 12,998.20 with seven of its 10 main groups in negative territory.
Financials were down 0.9 percent, stung by Swiss investment bank UBS AG's UBSN.VX announcement of $4 billion in new writedowns. The bank signaled half of that was connected to bond insurers.
In Toronto, Canadian Imperial Bank of Commerce (CM.TO: Quote) tumbled $1.85, or 2.6 percent, to $68.70. CIBC, Canada's fifth biggest bank, has hedged some of its subprime exposure with troubled U.S. bond insurer ACA Capital Holdings Inc, and other bond insurers. Continued...