TSX drops nearly 2 percent on euro zone fears

Wed Sep 28, 2011 5:26pm EDT
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By Julie Gordon and John McCrank

TORONTO (Reuters) - Toronto's main stock index dived nearly 2 percent on Wednesday as concerns over Europe's mounting debt crisis cast a shadow on global economic growth prospects, sending commodities lower.

The TSX index's mining-heavy materials sector skidded 3.9 percent and its energy sector fell 3.24 percent as doubts about whether European officials would or could take action to rescue the Greek economy caused investors to shun commodities.

"If there is to be a disorderly default, then you're likely to have lower economic growth, and that's obviously the driver," said Gavin Graham, president of Graham Investment Strategy.

"Canada gets hit hardest when you're having a 'risk off' trade and things like Teck and Cameco and the energy stocks are getting thumped pretty badly."

Diversified miner Teck Resources was down 5.18 percent at C$30.40, and uranium producer Cameco Corp dropped 4.7 percent at C$19.50. Oil producer Suncor was the biggest heavyweight decliner, down 4.69 percent at C$27.05, and Canadian Natural Resources shed 3.08 percent to C$30.79.

"There hasn't been any concrete news or any tangible solution out of Europe, so I think that manifests itself in a big retreat in commodity prices," said Elvis Picardo, vice president of research at Global Securities.

U.S. crude, a day after posting gains for the first time in five sessions, tumbled 3.64 percent to under $80 a barrel, while copper collapsed 7 percent to its lowest close in 14 months, and gold fell 3 percent as investors moved to the U.S. dollar as a safe haven.

The Toronto Stock Exchange's S&P/TSX composite index closed down 1.99 percent, or 235.22 points, at 11,585.87. Eight of the index's 10 main groups declined.   Continued...