February 17, 2009 / 3:42 PM / 10 years ago

CANADA STOCKS-TSX falls on worries of deepening recession

* TSX led lower by 4.8 pct drop in financial sector

* Teck Cominco falls 9.8 percent after quarterly results (Adds details, quote)

TORONTO, Feb 17 (Reuters) - Toronto’s main stock index fell more than 2 percent on Tuesday morning as energy issues slumped on a drop in the price of oil, and as new reports fanned concerns about a deepening global recession.

The financial services sector, down 4.8 percent, led the index lower. Insurer Manulife Financial (MFC.TO) dropped 8.3 percent to C$16.08, while Royal Bank of Canada (RY.TO) fell 4.5 percent to C$28.46.

Further concerns about the banking sector were sparked by a new report by credit rating agency Moody’s that suggested the the economic downturn in Eastern Europe could drag Western banks further into the red. [ID:nLH575804]

“A weak economy is going to lead to further credit defaults and writeoffs for the banking sector,” said Gavin Graham, director of investments at BMO Asset Management.

“The Canadian banks are getting whacked, but they get whacked less badly than the other banks because of their lack of exposure to potential trouble spots like, say, Central and Eastern Europe,” he said.

At 10:09 a.m. (1509 GMT), the S&P/TSX composite index .GSPTSE was down 201.50 points, or 2.32 percent, at 8,476.60, with nine of its 10 main sectors lower. The lone sector in positive territory was the resource-laden materials group, up 2.1 percent, as gold prices got a boost as investors sought refuge from economic gloom.

Barrick Gold (ABX.TO) rose 4.8 percent to C$48.93, while Goldcorp (G.TO) climbed 5.1 percent to C$41.10.

The price of U.S. crude oil futures fell to around $35 a barrel on demand concerns, which outweighed lower supply due to OPEC cutbacks. [ID:nN17352740] EnCana Corp (ECA.TO) fell 3.7 percent to C$52.09, and the TSX energy group as a whole was down 3.4 percent.

Also hitting investor sentiment was data that showed slumping New York state manufacturing production, which added to worries about the weakening economy in the United States, Graham said. [ID:nN17270835]

Copper and zinc producer Teck Cominco TCKb.TO swung to a quarterly net loss from a year-earlier profit, hurt in part by charges and retreating commodity prices. [ID:nBNG233551] Teck fell 9.8 percent to C$4.44.

$1=$1.26 Canadian Reporting by Jennifer Kwan; editing by Peter Galloway

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