September 16, 2008 / 2:13 PM / 10 years ago

UPDATE 1-Toronto stock index slips 2.8 pct on AIG worries

*Oil slips as financial turmoil seen undercutting demand

*Investors await U.S. Federal Reserve’s rate decision

*Toronto benchmark index crosses bear market threshold

(Adds details)

TORONTO, Sept 16 (Reuters) - The Toronto Stock Exchange’s main index tumbled at the open on Tuesday, as investors worried over U.S. insurer American International Group’s (AIG.N) ability to secure fresh capital and on a big drop in oil.

Shortly after the open, the S&P/TSX composite index .GSPTSE was down 345.37 points, or 2.82 percent, at 11,908.66, with all of its 10 main groups lower.

The move below 12,058.50 pushes Canada’s main stock index across the threshold of a bear market, commonly defined as a 20 percent drop from a peak level. The TSX reached a peak of 15,073.13 on June 18.

The hefty financial services sector slipped 1.8 percent with Canadian Imperial Bank of Commerce (CM.TO) down 4.5 percent at C$58.35, while Royal Bank of Canada (RY.TO) fell 3 percent to C$46.65.

AIG, thrown a $20 billion lifeline from New York state, came under fresh pressure as rating agencies downgraded the insurer’s debt. [ID:nSP46833].

The concerns come after markets melted down on Monday after Lehman Brothers Holdings Inc LEH.N filed for bankruptcy protection and Merrill Lynch & Co MER.N agreed to be taken over by Bank of America Corp (BAC.N). For details, see [ID:nN13574113].

Investors were also awaiting the U.S. Federal Reserve’s interest rate decision, which is expected at 2:15 EDT on Tuesday.

The heavyweight energy sector slipped 4 percent as oil plunged 4 percent to below $92 a barrel on worries turbulence in global financial markets will further undermine fuel demand, and on reports that U.S. oil infrastructure had been spared major damage from Hurricane Ike. [ID:nSP317159]

EnCana Corp (ECA.TO) fell 2.8 percent to C$66.13, while Canadian Natural Resources (CNQ.TO) sank 3.3 percent to C$74.47.

The resource-laden materials slipped 2.7 percent as gold and base metals slumped. Barrick Gold (ABX.TO) fell 2.6 percent to C$28.90, while Agrium AGU.TO dipped 1.7 percent to C$77.34. ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; editing by Janet Guttsman)

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