October 6, 2008 / 9:00 PM / 10 years ago

UPDATE 3-Toronto stocks plunge on recession worries

* Oil and gas sector falls 8 pct, leads market tumble

* Financial group declines after European selloff (Updates numbers, adds quotes and details)

By Cameron French

TORONTO, Oct 6 (Reuters) - The Toronto Stock Exchange’s main index dropped more than 5 percent on Monday, at one point recording its biggest intraday loss since Black Monday in 1987, as signs that the financial crisis was spreading to European banks sent investors in several markets running for the exits.

Worries of a global recession sent oil prices tumbling, leading to an 9.4 percent drop for the market’s energy sector, which was the weakest of the 10 TSX subgroups, all of which finished in the red.

“Clearly you have motivated selling. Whether it be margin calls, whether it be hedge fund activity or whether it just be general investor nervousness given that there are a lot of imponderables out there making people quite nervous,” said Irwin Michael, portfolio manager at ABC Funds.

The S&P/TSX composite index .GSPTSE ended down 572.92 points, or 5.3 percent, at 10,230.43.

Stocks fell hard right off the open as the emergency rescue of two big European banks and a move by several European governments to guarantee bank deposits ignited fears of a global recession.

This pulled oil prices below $90 a barrel for the first time since February, hammering shares of Nexen Inc NXY.TO, which fell 13.8 percent to C$18.18, and Suncor Energy (SU.TO), which ended down 13.6 percent at C$31.50.

At mid-morning, the index was down by more than 1,100 points, or 10 percent, its biggest intraday percentage loss since the market crash of October 1987 and its biggest point loss ever.

It also fell briefly below the 10,000 point level for the first time since July 2005, before paring losses through to the close.

“Investors are rattled and rightly so. This is the unwinding process and it takes no prisoners,” said John Ing, president of Maison Placements Canada.

Adding to the panic was report by economists at Bank of Nova Scotia (BNS.TO) that predicted Canada’s economy would head into a recession [ID:nN06331854].

Materials stocks fell 6 percent as concerns about demand pulled down base metals prices.

Sherritt International (S.TO) dropped 12.78 percent to C$4.34, while Cameco Corp (CCO.TO) dropped 11.2 percent to C$19.75.

The financials sector fell 3.7 percent, while the utilities subgroup dropped 6 percent, led by an 8.3 percent fall in TransAlta Corp (TA.TO). The stock ended at C$25.23. ($1=$1.10 Canadian) (Reporting by Cameron French; Editing by Peter Galloway)

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