March 17, 2008 / 1:18 PM / 11 years ago

Toronto stocks stung by credit woes, resources

TORONTO (Reuters) - The Toronto Stock Exchange’s main index saw its biggest decline in more than a month on Monday as it suffered the double whammy of weak resource issues and further worries over the global credit crisis.

Taking its cue from international markets, the S&P/TSX composite index skidded more than 300 points immediately after the opening bell in a steep selloff spurred by the purchase of Bear Stearns BSC.N by JPMorgan Chase (JPM.N) for the fire sale price of $2 a share.

Worries over how deeply a stumbling U.S. economy will infect the rest of the world and whether a slowdown will slash global demand for resources drove Toronto’s heavyweight energy and financial sectors down 2.8 percent and 2.5 percent respectively.

Shares of banks and resource companies were among the biggest weights on the index, with National Bank of Canada (NA.TO) falling C$1.54, or 3.4 percent, to C$44.39, and Canadian Natural Resources (CNQ.TO) down C$3.07, or 4.2 percent, at C$69.65.

The energy sector was also hurt by a decline in the price of oil, which retreated $4.53 to $105.68 a barrel, while investors traded in futures in favor of cash.

The S&P/TSX composite index .GSPTSE closed down 300.69 points, or 2.27 percent, at 12,952.15 with all but one of its 10 main groups negative. The index managed to gain back some losses after falling by more than 400 points in the afternoon.

“The real concern obviously is what else is happening,” said Brian Pow, vice president, research and equity analyst at Acumen Capital Partners, in Calgary, Alberta.

“Bear Stearns has been around for a long time. It went through the Depression and recovered, and when you have (JPMorgan) come in and offer what they did, considering where the stock was trading, just tells you there’s a lot going on behind the scenes that most investors can’t see.”

The materials sector, home to resource shares, tumbled on worries over global demand, falling 1.8 percent. Potash Corp of Saskatchewan POT.TO fell C$3.69, or 2.3 percent, to C$154.45 while Inmet Mining IMN.TO was off C$3.83, or 4.5 percent, at C$81.71.

The Toronto benchmark’s strong weighting in resources, which make up nearly half the index, kept it much more deeply below water than its U.S. counterparts.

In an effort to quiet markets, the U.S. Federal Reserve made an emergency 25 basis point cut to its discount rate on Sunday and widened its lending range of big financial firms. All eyes will be the Fed again on Tuesday as the central bank sits for its interest rate-setting meeting.

“The market was originally talking about half a percentage point cut, another 75 (basis points) was a week ago, and now we’re talking 100 basis points,” Pow said. “That can be sending a pretty negative message, if you ask me.”

The small health sector was the lone group with any upward momentum, jumping 7.1 percent with help from strong gains by QLT Inc QLT.TO and Cardiome Pharma COM.TO.

QLT surged C$1.29, or 55.6 percent, to C$3.61 after it said it will continue with plans to divest its topical acne treatment after the U.S. Food and Drug Administration lifted key blood monitoring requirements for the treatment.

Cardiome jumped C$2.02, or 32.3 percent, at C$8.27 after it released positive interim clinical results for its oral heart drug and said it was looking at possible partnerships and other strategic alternatives.

Market volume was 419 million shares worth C$8.5 billion. Decliners outpaced advancers 1,289 to 340. The blue chip S&P/TSX 60 index .TSE60 closed down 18.45 points, or 2.37 percent, at 760.31.

In New York, the Dow Jones industrial average .DJI managed to end with a small gain but the broader market finished lower. The Dow was up 21.16 points, or 0.18 percent, at 11,972.25, while the Nasdaq Composite Index .IXIC fell 35.48 points, or 1.6 percent, to 2,177.01.

($1=$1.00 Canadian)

Editing by Peter Galloway

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