February 4, 2010 / 10:16 PM / 9 years ago

CANADA STOCKS-TSX drops sharply on euro zone debt fears

* TSX down 261.70 points, or 2.3 pct, at 11,128.76

* Oil, gold slide as greenback soars

* Materials group leads way lower, down 5.1 pct (Adds details)

By Jennifer Kwan

TORONTO, Feb 4 (Reuters) - Toronto’s main stock index notched its steepest percentage drop since early October on Thursday as investor confidence was shaken by intensifying concerns about sovereign debt in some euro zone countries.

Barrick Gold (ABX.TO) was at the top of the list of heavyweight names on the downside, sliding 4.2 percent to C$36.45, while Suncor Energy (SU.TO) dropped 3 percent to C$31.71. Potash Corp of Saskatchewan POT.TO sank 5 percent to C$109.15.

Investors exited world stock markets and flocked to the safety of U.S. Treasury bonds and the greenback, which also rose on lackluster U.S. jobs data. [FRX/] The strength in the greenback weighed heavily on the price of oil, which plunged 5 percent to $73.14 a barrel, as well as on the price of gold, which briefly fell to a three-month low under $1,060 an ounce. [GOL/][O/R]

“It’s an aversion to risk and that’s caused the U.S. dollar to go up and, of course, on days like this you track the U.S. dollar and U.S. treasuries. All the other things fall off.” said Paul Gardner, partner & portfolio manager at Avenue Investment Management.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE tumbled 261.70 points, or 2.3 percent, to 11,128.76, with eight of the index’s 10 main groups lower. Materials led the slide with a 5.1 percent drop.

The Toronto index’s drop mirrored selloffs in international markets from New York to London, with sentiment beaten down in part by Greece’s fiscal troubles.

Those worries have raised questions about the sustainability of public finances in other euro zone countries, such as Spain and Portugal, after the global recession sparked surges in public debt and budget deficits. [ID:nEUROPEAND]

Investors were also concerned about credit tightening in China and its impact on commodities and the health of the global recovery.

Solid quarterly results from BCE (BCE.TO) and Open Text OTC.TO helped to lift the index’s information technology group, up 0.23 percent, and its telecoms group, which ticked 0.03 percent higher. They were the only two sectors in the black. [ID:nN03163570] [ID:nN03156053] [RCH/CA]

BCE was the leading heavyweight advancer, up 2.5 percent at C$28.31, and Open Text followed, soaring 9 percent to C$46.98.

The blue chip S&P/TSX 60 index .TSE60 closed 15.10 points lower, or 2.27 percent, at 650.68.

$1=$1.07 Canadian; editing by Peter Galloway Reporting by Jennifer Kwan; editing by Peter Galloway

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