January 17, 2008 / 2:14 PM / 11 years ago

Sinking Toronto stocks seen reaching dry ground

TORONTO, Jan 17 (Reuters) - The Toronto Stock Exchange’s main index, fresh off a dizzying fall the last two days, was seen regaining its footing on Thursday as commodity prices firm up.

Canada’s benchmark index has lost 623 points, or 4.6 percent, over the last two days, amid mounting worries over a U.S. recession, and as commodities tumbled on the prospect of softening demand.

But U.S. crude oil, a key indicator for the heavyweight TSX energy sector, bounced back above $91.50 a barrel as tension ramped up in the oil-rich Middle East.

Among other bellwethers for the resource-heavy TSX, spot gold and some base metals rose while natural gas futures sagged.

“The market is going to trade with commodities, no question about it,” said Bruce Latimer, trader at Dundee Securities.

“But there’s so much volatility in the market ... it makes a lot of people want to pass the dice for a couple days and let this thing settle down.”

Investors will peruse results from U.S. brokerage Merrill Lynch & Co Inc MER.N — which reported a larger-than-expected loss and took a writedown in the quarter — for further clues about the current credit crisis.

The news weighed on European stock markets and U.S. stock futures. For details, see: [nN17197431]

The TSX financial sector, down 6.2 percent so far this year, tends to be influenced by rumblings in the U.S. financial sector.

“You’d like to think that in the Canadian financial market, most of the bad news is out,” said Latimer. “But it’s hard to find leadership there now because they’re going through some unchartered water in terms of what they’re dealing with right now.”

Also in the credit market, small Canadian alternative lender Xceed Mortgage Corp (XMC.TO) reported a quarterly loss early on Thursday due to a writedown related to the asset-backed commercial paper market. For details, see: [nN17196934]

The market could react to remarks by Federal Reserve Chairman Ben Bernanke, who is scheduled to speak on the U.S. economy at 10 a.m. (1500 GMT).

The United States is Canada’s biggest export market, and any guidance Bernanke offers on monetary policy is likely to affect Toronto-listed stocks.

QLT Inc QLT.TO could also be on radars after the pharmaceutical firm said it would restructure and sell its U.S. operations. For details, see: [nN16163358]

The S&P/TSX composite index .GSPTSE starts the day at 13,074.86 after dropping 241.92 points, or 1.8 percent, in the previous session.

$1=$1.02 Canadian Reporting by Jonathan Spicer; Editing by Bernadette Baum

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