* Deepening economic gloom pressures all sectors
* Resource issues fall as oil drops below $59 a barrel
* Light volume in holiday-thinned trade
TORONTO, Nov 11 (Reuters) - The Toronto Stock Exchange’s main index fell 3.4 percent on Tuesday morning in a decline led by energy and materials issues, which dropped on falling oil and metals prices.
Investor gloom about the economic environment deepened and helped push oil prices below $59 a barrel, while a firmer U.S. dollar put pressure on metals prices. [ID:nLB342361]
As a result of the commodity weakness, the Toronto index’s oil and gas sector fell 4.8 percent and the materials group dropped 7.2 percent.
The day before, both sectors were beneficiaries of a commodity-driven rally that was sparked by China’s plan to pump $586 billion into its economy. But the China euphoria was short-lived as world stock markets returned to focusing on underlying economic worries. [MKTS/GLOB]
“It seems that each story that we get from a government standpoint to try to provide some type of coordinated support gives us but a brief rally,” said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario.
“And then the market focuses back on the underlying economics of the issue, which are obviously very weak.”
Trading was expected to be fairly thin as market participants were away for Remembrance Day in Canada and Veterans Day in the United States.
“Today’s activity has to be taken in context, insomuch as it’s probably going to be on lighter volume. So often times you’ll get exaggerated moves on those types of days,” Chandler said.
Shortly after 11:00 a.m. (1600 GMT), the S&P/TSX composite index .GSPTSE was at a two-week low, down 324.77 points, or 3.35 percent, at 9,364.03. All 10 of the index’s main sectors were in the red.
Airline stocks were under pressure as ACE Aviation Holdings ACEa.TO, the parent company of Air Canada ACa.TO, reported a quarterly loss, hurt mainly by high fuel prices. ACE is exploring options for its stake in Air Canada.[ID:nN10481115].
UBS cut Air Canada, saying the airline’s tightening liquidity is of particular concern given moderating demand. Air Canada stock is down 44 percent since the company reported results last week and liquidity concerns arose. UBS said that rival WestJet WJA.TO should emerge from the downturn with a bigger market share. [ID:nWNAB1642]
Air Canada extended losses for a third session, down 18.6 percent at C$2.94. WestJet lost 5.2 percent at C$9.60.
Nortel Networks Corp NT.TO also extended losses for a second day as more brokers cut their price targets on the telephone gear maker, which posted a big quarterly loss and set further cost cuts on Monday. Nortel slid 10.8 percent to 99 Canadian cents.
Cameco (CCO.TO), the world’s top uranium producer, was off 6.6 percent at C$18.44 but outperformed other Toronto-listed mining issues. It reported a 48 percent jump in third-quarter profit, but said it would look to cut costs and defer projects amid the global credit crunch. [ID:nN11304417]
Uranium One UUU.TO was one of the most heavily-exchanged issues on Tuesday, down 21 percent at C$1.04. South Africa’s Solidarity trade union said Uranium One UUU.TO plans to lay off 1,013 workers at its closed Dominion mine by January next year. [ID:nLB198961]
$1=$1.21 Canadian Reporting by Ka Yan Ng; Editing by Peter Galloway