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TORONTO (Reuters) - Toronto's main stock index closed lower for a second straight day on Thursday as robust Chinese growth data weighed on commodity prices, prompting fears the roaring economy could spur Beijing to tighten monetary policy to fight inflation.
China's fourth-quarter growth sailed past expectations to rise to 9.8 percent, sparking a global selloff in equities and pulling down commodity prices, as investors worried the world second-largest economy would move to choke off excessive demand.
Leading the decline in Toronto was a 2.07 percent slump in the materials group, home to mining companies. Potash Corp fell 3.05 percent to C$161.14, while fellow fertilizer producer Agrium Inc was down 3.75 percent at C$87.22.
Base-metals miner Teck Resources Ltd. slid 3.35 percent to C$60.27. Uranium giant Cameco Corp fell 4.27 percent to C$38.10, while Barrick Gold was off 1.51 percent at C$46.81.
"The commodities had blown up to a pretty high level and the market was looking for an excuse to sell off, and the Chinese news was probably that excuse," said Douglas Davis, chief executive of Davis-Rea.
Copper prices notched their biggest one-day loss since mid-November as a stronger U.S. dollar added to the downward pressure from concerns over China, the world's biggest consumer of the metal.
Gold prices also fell to two-month lows as the U.S. dollar rose and investment demand for the safe-haven metal waned following strong U.S. economic data that indicated two key economic trouble spots -- the housing market and employment -- were on the mend.
The Toronto Stock Exchange's S&P/TSX composite index finished the day down 107.72 points, or 0.8 percent, at 13,331.32. Eight of its 10 main groups ended lower.
The slide added to Wednesday's loss of 120.16 points, or 0.89 percent, and came after the TSX hit a 28-month high on Tuesday.
"It could come off for a few more days, but the market has been so resilient. So it's only two days down ... it's not especially bearish," said Davis.
Sid Mokhtari, a market technician and director at CIBC World Markets, believes the retreat could last longer, noting that a typical correction will last about four to six weeks with a drop of about 5 to 7 percent.
"But I think people should view this as a window of opportunity and not necessarily panic and go crazy selling their stock," Mokhtari added.
"There aren't too many negative or technical structures that one could highlight here, other than an overbought condition... I think by summer of 2011, we're standing at much, much higher levels and people will be surprised by the magnitude of strength that will come behind the market," he said.
In individual corporate news, shares of Labopharm jumped 10.11 percent to 98 Canadian cents, after the drug maker received approval from Canadian health regulators for its once-daily antidepressant Oleptro.
Editing by Rob Wilson