March 4, 2008 / 5:26 PM / in 10 years

UPDATE 2-Toronto stock index drops 200 points on bank woes

TORONTO, March 4 (Reuters) - Disappointing bank results, general worries over the U.S. economy and retreating commodities sent Toronto stock investors fleeing for the exits on Tuesday.

By late morning, the Toronto Stock Exchange’s main S&P/TSX composite index .GSPTSE was down 200.64 points, or 1.5 percent, at 13,343.74.

All 10 of the TSX index’s 10 main groups were lower, led down by a 2.2 percent drop in the materials group and a 1.1 percent fall in energy shares. The heavily weighted financial group was down 1.9 percent.

Financial shares slipped on disappointing results from two of Canada’s big banks.

Bank of Montreal (BMO.TO) dropped C$1.63 to C$46.73, while Bank of Nova Scotia (BNS.TO) fell C$1.44 to C$45.06.

Bank of Montreal’s first-quarter earnings fell 27 percent as it took writedowns of C$362 million after tax for trading and valuation-related losses, and made a higher allowance for credit losses.

Bank of Nova Scotia said its first-quarter earnings dropped 18 percent due to substantial volatility in global financial markets.

Also sparking worries in the banking sector were comments from Gulf investment agency Dubai International Capital, which said on Tuesday that it would take “a lot more money” to rescue Citigroup Inc (C.N) following investments from Abu Dhabi, Kuwait and Saudi Arabia’s Prince Alwaleed.

Citigroup suffered a record $9.83 billion fourth-quarter loss tied mainly to mortgage writedowns.

“The overall concern on the financial markets has put the pressure on it,” said Brian Pow, vice-president of research at Acumen Capital Partners.

“What we have seen over the last few weeks is that the U.S. problem is not only the U.S.’s problem. It’s extended to all around the world and hurting all countries and all banking systems.”

The resource-heavy materials index dropped as the price for gold backed off recent highs, to settle at $968 an ounce, well off Monday’s record of $989.30 an ounce.

Barrick Gold (ABX.TO), the biggest gold producer in the world, dropped C$1.62 to C$51.30.

Energy issues slipped as the price for U.S. crude oil dropped 2.4 percent to $100 a barrel, off the record high of almost $104 a barrel it set recently. OPEC ministers, which meet on Wednesday, are expected to leave output unchanged.

Suncor Energy (SU.TO) was off C$1.49 at C$102.38.

The volatility overshadowed Tuesday’s big Bank of Canada interest rate cut. The bank slashed its key rate by half a percentage point to 3.50 percent and signaled further cuts to shield the economy from the damaging effects of the U.S. economic slowdown. It was the bank’s first half-point cut since November 2001. ($1=$1.00 Canadian) (Reporting by Scott Anderson; Editing by Peter Galloway)

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