July 17, 2008 / 9:21 PM / 11 years ago

UPDATE 5-Sagging resources drag down Toronto stocks

(Adds details, quotes)

* TSX slips as resource sectors falter

* Energy shares pulled down by sagging oil prices

* Nexen falls after disappointing quarterly profit

By Leah Schnurr

TORONTO, July 17 (Reuters) - The Toronto Stock Exchange’s main index slipped lower on Thursday as a strong showing from financials was offset by resource shares that were hit by another sharp drop in oil prices.

Crude fell by $5.31 to $129.29 a barrel amid worries over dampening demand in the United States, as well as easing tensions between Iran and the West.

The drop in oil — which is still up nearly 30 percent for the year — battered Bay Street’s heavyweight energy group, sending it down 3.2 percent.

“It’s apparent that the U.S. is really responding pretty negatively to what’s going on,” said Brian Pow, vice-president of research and equity analyst at Acumen Capital Partners in Calgary, referring to the still-high energy prices.

“People are really tightening their belts.”

Nexen Inc NXY.TO slumped after the oil producer posted a disappointing quarterly profit, as one-time charges and trading losses nearly wiped out its gains from record high oil prices. Nexen’s shares closed down C$4.01, or 10.9 percent, at C$32.95.

The S&P/TSX composite index .GSPTSE closed down 43.55 points, or 0.32 percent, at 13,460.25, with just three of its 10 main sectors in the negative.

Also in the energy group, Canadian Natural Resources (CNQ.TO) fell C$3.01, or 3.4 percent, to C$86.64, while Suncor Energy (SU.TO) slid C$2.10, or 3.7 percent, to C$54.50.

The materials sector fell 2.8 percent, while its gold producers were trimmed by the lower price of bullion, which followed oil’s descent.

The lion’s share of the losses came from the two resource sectors, with energy producers, miners and fertilizer firms among the biggest laggards by weight.

Agnico-Eagle Mines (AEM.TO) was down C$2.95, or 4 percent, at C$70.28, while fertilizer company Potash Corp of Saskatchewan POT.TO lost C$8.75, or 3.9 percent, to C$215.31.

The financial sector led the upside, as it took heart from stronger than expected results from U.S. banks.

Canadian Imperial Bank of Commerce (CM.TO) rose C$3.91, or 7.4 percent, to C$57.10, and Bank of Montreal (BMO.TO) was up C$3.05, or 7.3 percent, at C$44.98, while the sector overall climbed 3.3 percent.

The banks gave the TSX a big lift in the previous session, helping it come back from Tuesday’s drop of more than 2 percent, but Douglas Davis, president at Davis-Rea, called the rally “a one shot recovery”.

“No market goes straight up,” Davis said. “Markets need periods of correction and that’s what’s happening here.”

The TSX has sagged 7 percent for the month so far, and is more than 11 percent off its life high, reached in early June, as it has been battered by fallout and fear from the credit crunch, while the energy sector has pushed lower.

Market volume was a hefty 434 million shares worth C$9.6 billion. Advancers outpaced decliners 783 to 770. The blue chip S&P/TSX 60 index .TSE60 closed down 2.16 points, or 0.27 percent, at 805.57.

In New York, stocks swung in the opposite direction as the drop in oil prices eased worries over inflation, while optimism was helped by unexpectedly strong earnings.

The Dow Jones industrial average .DJI closed up 207.38 points, or 1.85 percent, at 11,446.66, while the Nasdaq composite index .IXIC rose 27.45 points, or 1.2 percent, to 2,312.30. (Editing by Rob Wilson) ($1=$1.01 Canadian)

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