Toronto stocks drop 7 percent as U.S. rejects bailout

Mon Sep 29, 2008 5:47pm EDT
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By Cameron French

TORONTO (Reuters) - The Toronto Stock Exchange's main index tumbled nearly 7 percent on Monday, the biggest drop in eight years, as U.S. lawmakers rejected a proposed $700 billion bailout of the financial services sector, sending investors fleeing for the exits.

As the U.S. House voted to reject the Wall Street rescue plan, concerns mounted that the fallout from the crisis in the United States was spreading rapidly around the globe and that the world economy was headed for a sharp downturn.

The S&P/TSX composite index dropped 840.93 points, or 6.93 percent, to 11,285.07, its biggest percentage drop since October 2000, when markets were roiled by the bursting of the tech bubble. On a points basis, it was the biggest decline ever.

"This is yet another Black Monday," said John Ing, president at Maison Placements Canada.

Fueling the carnage on the market was a $10 drop in the price of oil, prompted by rising concerns of a global slowdown, which sent the heavily weighted energy sector down more than 10 percent.

That, along with concerns over base metal prices and general nervousness over the bailout package, kept stocks under pressure for most of the session.

But the picture got worse at mid-afternoon, with the index plunging 300 points in just over five minutes as results showed the congressional vote going against the plan.

"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."   Continued...

<p>A general view of the TSX (Toronto Stock Exchange) Broadcast Centre in Toronto June 20, 2008. REUTERS/Mark Blinch</p>