October 6, 2008 / 4:08 PM / 10 years ago

UPDATE 2-Toronto stocks cut losses after 10 pct slide

* Oil and gas sector falls 9 pct, leads market tumble

* Financial group declines after European selloff

* Scotiabank sees Canadian recession (Adds quotes, details throughout)

By Ka Yan Ng

TORONTO, Oct 6 (Reuters) - The Toronto Stock Exchange’s main index was down nearly 5 percent by late Monday morning, as it managed to regain some ground after posting its biggest intraday drop since October 1987

Shortly after 11:20 a.m. (1520 GMT), the S&P/TSX composite index .GSPTSE was down 613.19 points, or 4.68 percent, at 10,190.16, with all 10 main groups in the red. Earlier in the day the TSX had been down about 1,100 points, or more than 10 percent.

The fall was led by a sharp retreat in the energy sector as oil prices tumbled on concerns the global credit crisis would drag the world economy into recession.

Crude oil prices fell to an eight-month low below $90 a barrel, dragging the Toronto energy sector down 9.2 percent.

Canadian Natural Resources (CNQ.TO) was among the top net losers, down 8.2 percent at C$58.65. Imperial Oil (IMO.TO) dropped 11.4 percent to C$36.80, while EnCana (ECA.TO) fell 5.5 percent to C$55.79. Suncor (SU.TO) slid 11.2 percent to C$32.37.

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

The TSX index fell below 10,000 for the first time since July 2005 by midmorning, and seemed poised to mark its biggest decline since the market crash of 1987, when it fell more than 11 percent.

“For a long time we thought we were immune from America’s problems but everything has sort of been been caught in this vortex,” said Ing.

The Dow Jones industrial average was off nearly 500 points, falling below 10,000 points in intraday trade for the first time since October 2004.

Bank of Nova Scotia (BNS.TO) said it expects the Canadian economy to head into recession and a Scotiabank economist said that by next summer there will be little or no growth in Canada [ID:nN06331854].

The bank also added its voice to the mounting chorus that the U.S. is primed to fall into recession. Toronto’s big selloff on Monday were partly driven by fears of a synchronized global slowdown.

“The confidence is being shaken about the degree of the recession we might be entering into,” said Michael Sprung, president at Sprung & Co. Investment Counsel.

“It’s not only its depth but how long it might persist. With that comes the worry about, on a global basis, the rate at which global trade might slow down here and negatively affect commodity prices.”

The sour mood also came as several bank rescues in Europe increased concern about the stability of world financial institutions. Toronto’s financial group fell 3.4 percent.

Scotiabank said it will spend C$2.3 billion to buy Sun Life Financial’s (SLF.TO) stake in CI Financial CIX_u.TO. [ID:nN06280146] Shares of CI were up 2.8 percent at C$17.11, while Scotiabank fell 4 percent to C$45.26. Sun Life Financial eased 5.6 percent to C$34.

In economic news, the construction industry pulled in its horns by more than expected in August, as the value of building permits fell by 13.5 percent from July, according to Statistics Canada data released on Monday. [ID:nN06414205]

But there was a shimmer of good economic news as purchasing activity expanded in September, and at a faster pace than the previous month, according to the Ivey Purchasing Managers Index released. [ID:nN06386229]

$1=$1.10 Canadian Additional reporting by Jennifer Kwan; editing by Rob Wilson

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