October 7, 2008 / 4:01 PM / in 9 years

UPDATE 2-Toronto stocks turn lower, oil offsets materials

* Oil and gas sector turns negative after initial charge

* Gold miners shine, subindex up 4.3 percent

* RBC cuts share-price targets on five banks, Manulife

(Adds details)

TORONTO, Oct 7 (Reuters) - The Toronto Stock Exchange’s main index was lower on Tuesday morning, after soaring at the open, as strength in gold miners and other materials shares was not enough to offset weakness in oil companies.

The index jumped nearly 300 points shortly after market open, turned negative, then kept swinging erratically in nervous dealings.

The oil and gas sector led the initial charge higher, as oil prices CLc1 rose from the eight-month lows hit on Monday but then fell back below $90 a barrel. The index’s energy group, which was battered in the previous session, was up more than 10 percent at the open but swiftly cut gains.

Canadian Natural Resources (CNQ.TO) rose 0.2 percent to C$58.48, but Suncor (SU.TO) was down 4.6 percent at C$30.06.

Shortly after 11:15 a.m. (1515 GMT), the S&P/TSX composite index .GSPTSE was down 60.40 points, or 0.59 percent, at 10,170.03. Eight of the index’s 10 main groups were in negative territory.

On Monday the main index dropped more than 5 percent. At one point it 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.

“Yesterday was a brutal day in the market and now we’re showing some signs of stabilizing, especially since the government in the States is trying to stem the flow for private money,” said Sal Masionis, stockbroker at Brant Securities.

“There’s still a tremendous amount of nervousness in the market.”

Market sentiment was initially cheerier as the U.S. Federal Reserve announced the creation of a commercial paper funding facility, another emergency move aimed at soothing volatile financial markets. [ID:nnN07447246]

The main bright spot was the gold subindex, which was up 5 percent as gold rose to above $880 an ounce. Agnico-Eagle (AEM.TO) gained 7.3 percent to C$51.49, while Goldcorp (G.TO) rose 7.2 percent to C$28.91.

Meanwhile, base metals and fertilizer shares were also firmer, sending the materials group up more than 4 percent. Potash Corp of Saskatchewan jumped 5.2 percent to C$100.24, while Agrium gained 3.7 percent to C$44.63.

The financials group, which fell nearly 4 percent in the previous session, posted a small decline. RBC cut share-price targets on five banks [ID:nWNAS3535] as well as on Manulife Financial (MFC.TO). Manulife was off 2.4 percent at C$33.89, but most banks were showing gains.

$1=$1.10 Canadian Reporting by Ka Yan Ng; Editing by Peter Galloway

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