TSX slumps, hit by fears of Italian gridlock

Mon Feb 25, 2013 4:51pm EST
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By Alastair Sharp

TORONTO (Reuters) - The prospect of a divided Italian parliament prompted a late retreat in banking and other Canadian financial stocks on Monday, pushing the main Toronto equity index into the red after it had earlier hit a three-week high.

Voting projections in Italy show no coalition garnered enough votes to form a government, reviving fears about an extended period of uncertainty in Europe's third-largest economy.

"The basic problem is that the whole Europe situation had been shunted to the back-burner ever since the beginning of this year," said Elvis Picardo, strategist at Global Securities in Vancouver.

"The latest developments show that there is a degree of risk that is still attached to the continent," he said. "It's causing investors to rethink some of their assumptions about the market."

Royal Bank of Canada (RY.TO: Quote) fell 1 percent to C$63.59, insurer Manulife Financial Corp (MFC.TO: Quote) lost 2.1 percent to C$14.84 and its rival, Sunlife Financial Inc (SLF.TO: Quote), slipped 1.9 percent to C$28.34.

Picardo said investors may also be feeling more cautious about bank earnings, which are due to be reported this week and next, after a recent string of weak domestic housing, employment, inflation and retail sales data. <.TO/O>

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended down 50.76 points, or 0.40 percent, at 12,650.87.

It had earlier hit 12,832.71, its highest level since January 30.   Continued...

A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch