TSX cuts losses after plunge to 23-month low

Tue Oct 4, 2011 5:15pm EDT
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By Claire Sibonney

TORONTO (Reuters) - Toronto's main stock index plunged to a 23-month low on Tuesday but recovered most of the day's losses as a late-day bargain-hunting rush and signs of more U.S. stimulus measures helped offset fears over Europe's debt crisis.

Traders also cited talk that European finance ministers had agreed to prepare action to safeguard their banks as another reason for the snap-back on stock markets in late dealings.

The TSX failed to turn positive, but U.S. stock indexes were swept higher in a dramatic rally heading into the close.

The TSX had a long way to come back after dropping more than 3 percent early in the day as the possibility of another global recession sparked a sell-off that hit financial shares and commodities hard. The day's low marked a 19 percent fall since the start of the year and a 24 percent decline from the 2011 high the index reached in March.

Battered energy shares closed slightly higher but the index's other two heavyweight groups, financials and materials, both ended 1.3 percent lower.

"A lot of the uncertainty and a lot of the volatility is being generated out of Europe," said Stephen Wood, chief investment officer for North America at Russell Investments in New York, adding that there were also concerns about soft U.S. data and slowing growth in China.

"It's not a market situation, it's a political situation ... investors are assuming the worst. There are a lot of very bad scenarios that Europe represents and it's not clear which one is likely to happen."

Greece appeared more likely to default on its debt after euro-zone finance ministers postponed a vital aid payment to Athens until mid-November.   Continued...

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