* TSX down 1.29 percent at 7,587.96
* Bank of Canada cuts rates to 0.5 pct, as expected
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TORONTO, March 3 (Reuters) - Toronto’s key stock market index dropped on Tuesday morning with financial stocks sagging anew on concern about eroding credit quality at Canada’s big banks.
Financials dropped nearly 5 percent and threatened to extend the market’s 5.4 percent slide on Monday, when soft oil prices, weak domestic GDP data and fears over the U.S. banking sector rattled investor confidence.
The financials came under fresh pressure on Tuesday as two of Canada’s largest banks — Bank of Nova Scotia (BNS.TO) and Bank of Montreal (BMO.TO) — reported quarterly results that showed they remained profitable even as the global financial crisis raged, but that bad loans are on the upswing. [ID:nN03459519]
Shares of Bank of Nova Scotia fell 0.9 to C$26.79, while Bank of Montreal fell 0.07 percent at C$26.81.
“It’s continued uncertainty in the sector, continued uncertainty on guidance going forward,” said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario.
“They’ve all accounted for and provided for increased loan loss provisions. There is a concern about is there more of that to come still.”
At 11:24 a.m. (1531 GMT), the S&P/TSX composite index .GSPTSE was down 99.55 points, or 1.29 percent, at 7,587.96, with nine of its 10 main groups higher.
The drop also came after the Bank of Canada cut its benchmark rate to a record low of 0.5 percent and signaled and signaled that it may take extra steps to pump money into a system that remains stubbornly short of credit. [ID:nN03241] ($1=$1.30 Canadian) (Reporting by Jennifer Kwan; Editing by Frank McGurty)