March 17, 2008 / 2:33 PM / in 10 years

UPDATE 1-Toronto stocks drop 2.2 pct on U.S. financial concern

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TORONTO, March 17 (Reuters) - Toronto’s main stock market index plunged to its lowest level in more than a month on Monday in the wake of the fire sale purchase of Bear Stearns BSC.N by JP Morgan Chase (JPM.N) and the U.S. Federal Reserve’s emergency measures on Sunday to prop up U.S. financial markets.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE fell 286.80, or 2.2 percent, to 12,966.04 after touching a six-week low of 12867.01 earlier in the session.

In a bid to stem a fast-spreading global financial crisis, the Fed made an emergency quarter-percentage-point cut to its discount rate to 3.25 percent on Sunday and expanded lending to a wider range of big financial firms.

JPMorgan will buy Bear Stearns at the fire sale price of $2 per share, well below the $30.85 a share it closed at on Friday. Shares of the fifth-largest U.S. investment bank had reached a high of $172.61 last year.

“Given the events on the weekend, what we are seeing is not a surprise. Certainly the financials are going to be crushed today,” said Michael Sprung, president at Sprung and Co Investment Counsel.

“Our view so far would be to stand out of the way of the truck and don’t panic.”

Overall, nine of the TSX index’s 10 main groups fell, with the heavily weighted financial group down 3.1 percent and the influential energy group off 2.5 percent.

The resource-heavy materials group was off just 0.5 percent, as a 1.4 percent rise in the gold subgroup helped prop up the index.

All of the country’s biggest banks fell as investors fretted about the fallout from the U.S. financial crisis.

Bank of Nova Scotia (BNS.TO) fell C$1.68 to C$38.49 and Canadian Imperial Bank of Commerce (CM.TO) dropped C$3.00 to C$56.90.

But Sprung cautioned investors to remain calm, noting that Canadian financial institution were in better shape than their U.S. counterparts.

“Canadian financials are much better capitalized than their U.S. counterparts, but people should look out for those Canadian financials that have large operations and exposures in the U.S.,” he said.

Canada energy issues also took it on the chin as the price for U.S. crude oil backed off a record high of $111.80 a barrel to around $107.18 as part of a wider commodity selloff.

Suncor Energy (SU.TO) dropped C$2.86 to C$101.27 and Canadian Natural Resources (CNQ.TO) fell C$2.86 to C$69.86.

Mixed sentiment helped underpin the materials group. Base metals firm Teck Cominco TCKb.TO dropped C$1.80 to C$40.74 and Potash Corp (POT.TO) was off 64 Canadian cents at C$157.50.

But gold shares rode a record gold price higher with Barrick Gold (ABX.TO) climbing 46 Canadian cents to C$52.96 and Agnico-Eagle Mines (AEM.TO) up C$2.33 at C$81.33.

The lightly-weighted healthcare sector soared 8.3 percent on the back of a 35-percent jump in market heavyweight Cardiome Pharma (COM.TO).

The company, which specializes in heart ailment treatments, added C$2.15, or 34.4 percent, to C$8.40 after it announced positive interim clinical results from its Phase 2b study of its vernakalant atrial fibrillation treatment.

$1=$0.99 Canadian Reporting by Scott Anderson; Editing by Bernadette Baum

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