Commodities and rate move batter Toronto stocks

Tue Oct 21, 2008 6:09pm EDT
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By Jennifer Kwan

TORONTO (Reuters) - The Toronto Stock Exchange's main index ended its brief winning streak by plunging more than 450 points on Tuesday, as it was hit by disappointment over a smaller-than-expected rate cut by the Bank of Canada and by falling commodity prices.

The Bank of Canada was largely forecast to cut its key rate by 50 basis points and the central bank's lowering of its overnight rate to 2.25 percent from 2.50 percent failed to fulfill expectations.

"It was widely expected that they were going to cut," said Levente Mady, broker at MF Global Canada, in Vancouver. "The question mark was whether they were going to cut 25 or 50. That might have been a little disappointing."

The TSX index was also weighed down by a quarterly loss reported by big insurer Sun Life Financial Inc, which was hit by credit-related writedowns and a decline in equity markets.

"The focus once again seems to be turning to the real economy and to earnings reports," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver.

"You had a substantial decline in U.S. equities and that sort of sentiment got into the Canadian side as well," Picardo said.

"You add that to a less-than-upbeat assessment from the Bank of Canada about the prospects of the economy going forward and that all adds to a fairly negative tone that is hard to overcome in a market like this."

The S&P/TSX composite index snapped its two-day winning streak to close down 455.60 points, or 4.44 percent, at 9,795.80, with all but one of its 10 main groups lower. The small healthcare sector eked out a 3.9 percent gain.   Continued...

<p>People attend a market open ceremony for the Toronto Stock Exchange at the TSX Broadcast Centre in Toronto June 20, 2008. REUTERS/Mark Blinch</p>