* TSX down 392.5 points, or 3.28 pct, at 11,562.51
* Fed warning, China data hammer global markets
* Eight of 10 sectors lower; materials, energy weigh
* Market off nearly 20 percent from 2011 high (Adds further details)
By Trish Nixon
TORONTO, Sept 22 (Reuters) - Toronto’s main stock index plunged more than 3 percent on Thursday, touching its lowest level in more than a year, as a grim economic outlook from the U.S. Federal Reserve and weak data from China stoked fears of a global recession.
Wall Street also finished down more than 3 percent, world stocks fell to 13-month lows and commodities tumbled on the wave of negative news as risk aversion gripped global markets. [MKTS/GLOB]
“Fears of economic contraction and default in Europe create lack of confidence, which creates self-fulfilling prophecy, which quite possibly will lead to a recession in the fourth quarter,” said Barry Schwartz, vice-president and portfolio manager at Baskin Financial Services.
“Stocks and sectors are trading as if a recession is a done deal.”
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended the session down 392.5 points, or 3.28 percent, at 11,562.51. Earlier, it sank as low as 11,420.35, its weakest point since July, 2010.
The index closed down more than 19 percent from the peak it reached in March. A decline of 20 percent is generally viewed as a bear market.
The selloff was widespread, with eight of the index’s 10 main sectors finishing lower.
“It sure smells a little bit like panic,” said Levente Mady, market strategist at Union Securities, in Vancouver. “Going into the weekend it could be fairly hairy. I don’t really feel comfortable keeping a long position heading into Friday and Monday here.”
The materials group sagged 6 percent while energy issues slid 4.7 percent as commodity prices were pummeled by fears of slowing world-wide demand.
Data showing contraction in China’s manufacturing sector for a third straight month helped drive down oil prices by more than 4 percent and sent the price of copper to a one-year low.
Gold, a traditional safe haven, slumped more than 3 percent as the U.S. dollar strengthened. [O/R] [MET/L] [GOL/]
Barrick Gold (ABX.TO) was the heaviest drag on the TSX, down 6.3 percent at C$50.19, followed by Suncor Energy (SU.TO), which dropped 6.8 percent to C$26.21. Potash Corp (POT.TO) lost 4.3 percent to C$48.18, and Teck Resources TCKb.TO tumbled 6.7 percent to C$31.75.
Financials tumbled 2.3 percent, led by Royal Bank of Canada (RY.TO), down 2.6 percent at C$45.36. Toronto-Dominion Bank (TD.TO) was down 2.4 percent at C$70.49.
In the past two sessions the TSX has fallen more than 5 percent. The Fed set the ball rolling on Wednesday when its statement that the U.S. economy faces “significant downside risks” brought fears of another global recession to the forefront.
Investors, already worried about a possible Greek debt default and the euro zone’s intractable debt crisis, see governments unable to respond to the problems.
Mady said that with interest rates already at zero in the U.S. there was little more that policy-makers could do to help stimulate the economy and rally markets.
“When you get to zero percent, they can’t help any more. You might as well toss the Fed, all their governors and the rest, into the trash bin because they are becoming irrelevant like the Bank of Japan did 20 years ago,” he said.
“That means this market could be in trouble for a while.”
($1=$1.03 Canadian) (Editing by Jeffrey Hodgson and Rob Wilson)