September 3, 2008 / 3:28 PM / 10 years ago

UPDATE 1-Toronto stocks sag, weighed down by commodity stocks

* Sharp drop in oil prices pulls down energy shares

* Mining stocks hurt by oil’s slide and firm U.S. dollar

* Decline comes after drop of more than 3 percent Tuesday

(Adds details)

TORONTO, Sept 3 (Reuters) - The Toronto Stock Exchange’s main index fell on Wednesday morning, extending its losses after a big drop the previous session, pulled down by weakness in commodity-related stocks.

The key energy sector was down 2.3 percent as oil fell to around $108 a barrel on slowing demand in the United States and other consuming nations, and as concerns over Hurricane Gustav eased. EnCana Corp (ECA.TO) slipped 2.2 percent to C$73.97.

Materials, home to resource stocks, dropped 2.6 percent, as gold sagged on oil’s slide and on a firmer U.S. dollar. Barrick Gold (ABX.TO) fell 3.3 percent to C$33.85, while copper miner First Quantum Mining (FM.TO) slipped 5.9 percent to C$61.18.

The two sectors, which account for about half of the index’s total weight, began the day with choppy activity and treaded in positive territory before slumping back down.

The volatility reflects caution on the market, said Julie Brough, vice president at Morgan Meighen & Associates.

“Is the commodity correction over or not? I don’t know,” she said. “I certainly see more room on the downside for major commodities, and there is certainly momentum in that direction right now.”

At midmorning, the S&P/TSX composite index .GSPTSE was down 210.38 points, or 1.6 percent, at 13,089.16, with all 10 of its main groups lower.

This sell-off follows the benchmark index’s more than 3 percent tumble on Tuesday, triggered by a steep drop in the price of crude oil. It was the biggest one-day percentage loss for the benchmark index since January when Bay Street was pummeled by fears over the U.S. economic outlook.

In economic news, the Bank of Canada held its key interest rate steady at 3 percent on Wednesday, a move that was widely expected and had a muted impact on stocks. It gave no indication of future interest rate moves, but it was more downbeat on the prospects for U.S. and Canadian economic growth.

Talisman Energy TLM.TO fell 2.3 percent to C$17.10. It said on Wednesday it agreed to sell its non-core Dutch assets in the North Sea to Total Holdings Nederland B.V. (TOTF.PA) as it advances its plan to focus on key areas.

The $480 million deal, which excludes working capital, includes stakes in three licenses, Talisman said. [ID:nN03494891]

Suncor Energy Inc (SU.TO) fell 1.9 percent to C$53.88 after said on Tuesday it expects a processing unit at one of its oil sands upgrading plants to be off line for up to 90 days. This would change the mix of its output but not cut overall production. [ID:nN02442099]

In retailing, Forzani Group Ltd FGL.TO fell 2.7 percent to C$13.14 after the country’s biggest sporting goods retailer said a sluggish Canadian economy and consumer pessimism pulled down its quarterly results. [ID:nN03494064] ($1=$1.06 Canadian) (Reporting by Jennifer Kwan)

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