TSX falls on bank, resource issues in quiet trade

Mon Jan 17, 2011 5:33pm EST
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TORONTO (Reuters) - Toronto's main stock index slipped on Monday, weighed down by mostly soft resource and financial issues in light trading volume.

Financials were mostly weaker, falling 0.17 percent, as investors assessed news that Ottawa will tighten mortgage rules for the second time in less than a year, partly to curb rising household debt levels.

For Canadian banks, the new rules may add to a slowing of personal loan growth, but analysts said a slowdown had already been expected due to expectations of higher interest rates, more prudent lending practices on the part of banks, and the possibility of tighter mortgage standards.

"Over half the loans written by the banks are real estate-secured loans. This will shrink the market a little bit and it will also perhaps cause the banks not to be able to lend on the leverage that they were before. It's going to impact their earnings to some extent," said Michael Sprung, president at Sprung & Co. Investment Counsel.

By session's end, the financials had cut losses, with Bank of Montreal down 0.13 percent at C$59.45, Toronto-Dominion Bank down 0.09 percent at C$76.10, and Bank of Nova Scotia off 0.25 percent at C$56.69.

Bucking the trend, Royal Bank of Canada rose 0.15 percent to C$53.97, while mortgage lender Home Capital Group gained 1.11 percent to C$53.90.

Overall, the Toronto Stock Exchange's S&P/TSX composite index fell 23.95 points, or 0.18 percent, to close at 13,440.11. Seven of the index's 10 main sectors declined as thin trading conditions prevailed with U.S. markets closed for the Martin Luther King holiday.

The index was flat for most of the session.

The materials sector finished down 0.24 percent, but its constituents were mixed, with strong golds offset by sinking base metals and fertilizer issues. The energy group was also a weak link, down 0.41 percent.   Continued...

<p>People walk by a sign displaying TSX information in Toronto, August 17, 2009. REUTERS/Mark Blinch</p>