October 8, 2008 / 4:41 PM / 10 years ago

UPDATE 2-Toronto stock index sags in broad selloff

* Bank of Canada’s rate cut initially buoys sentiment

* Energy leads downturn as oil price drops

* Materials sector rallies, gold subindex shines (Adds details and quotes)

By Ka Yan Ng

TORONTO, Oct 8 (Reuters) - The Toronto Stock Exchange’s main index dropped after wild swings during on Wednesday, as investors took little comfort from a surprise interest-rate cut by the Bank of Canada designed to calm financial markets.

In a concerted effort with other central banks to lift confidence during the intensifying market turmoil, the Bank of Canada cut its key interest rate by a half percentage point to 2.5 percent. [ID:nN08492471]

Within the first 30 minutes of the session, the index fell more than 300 points, then swung more than 200 points into positive territory. The materials and financial sectors, which account for nearly half the TSX’s weighting, posted strong gains during this time.

But the rise was short-lived as investors worried that the central banks’ moves would not be enough to fix the credit crisis. By midday, the index was in deep negative territory.

Shortly after noon (1600 GMT), the S&P/TSX composite index .GSPTSE was down 235.41 points, or 2.4 percent, at 9,594.14. Eight of its 10 main groups were lower.

“It’s a great deal of uncertainty. On the one hand, people think it’s a great measure for rates to be reduced. On the other hand, just seeing what’s going on in the U.K.,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

“Confidence has been lost and it’s difficult to regain.”

Earlier on Wednesday, Britain unveiled a rescue plan for banks including up to 50 billion pounds ($87 billion) to buy stakes in lenders as it aims to restore confidence in the sector and the wider economy. [ID:nL8586784]

Nakamoto said there was concern that banks in other countries may undergo similar recapitalization to resolve the credit clog-up.

The TSX financials group turned sharply lower after initially rising, with Manulife Financial (MFC.TO) off more than 3 percent at C$31.70 and Sun Life (SLF.TO) down 4 percent to C$31.98. Toronto-Dominion Bank (TD.TO) lost 3.3 percent to C$54.16.

Energy stocks led the broader slide, with the price of oil dropping below $90 a barrel as the U.S. government inventory data showed huge jumps in crude oil and gasoline supplies last week, and the global rate cuts failed to boost optimism for the global economy.

Brokerage Genuity cut targets on big names in the energy sector [ID:nWNAS3731, including EnCana Corp (ECA.TO), Canadian Natural Resources (CNQ.TO), and Suncor Energy (SU.TO), as well as smaller oil and gas companies such as Oilexco Inc OIL.TO and Niko Resources <NKO.TO].

EnCana fell 6.3 percent to C$48.91, while Canadian Natural declined 6.6 percent to C$51.66.

One main source of strength on the index was in the materials group, which gained nearly 4 percent. Fertilizer producer Potash Corp of Saskatchewan POT.TO, the biggest net gainer, jumped 6 percent to C$102.77.

The gold subindex rose for a second session in a row, climbing 9 percent as the price of gold strengthened to above $900 an ounce. Agnico-Eagle (AEM.TO) rose 5.2 percent to C$52.84, while Barrick Gold (ABX.TO) jumped more than 10 percent to C$37.20.

In individual company news, Research In Motion Ltd RIM.TO said it will roll out a touch-screen model of its BlackBerry smartphone this autumn, putting it into direct competition with Apple’s (AAPL.O) popular iPhone. [ID:nN07480512] RIM was up 3.3 percent at C$62.96.

$1=$1.10 Canadian Reporting by Ka Yan Ng; editing by Rob Wilson

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