May 18, 2010 / 9:05 PM / 9 years ago

CANADA STOCKS-TSX falls for 4th session as oils, euro weigh

* TSX down 48.49 points, or 0.41 pct, at 11,764.51

* Commodity issues lead TSX lower on growth concerns

* Germany’s short-selling limits rattle markets (Updates to close, adds quotes)

By Jennifer Kwan

TORONTO, May 18 (Reuters) - Toronto’s main stock index fell on Tuesday on persistent fears that austerity measures in Europe could stifle global growth, as Germany said it would restrict short-selling linked to euro zone debt.

Ongoing worries about euro zone debt and the impact on economic growth kept some commodity prices lower, sending the TSX’s energy and materials sectors down 0.7 percent and 0.5 percent, respectively.

Imperial Oil (IMO.TO) sank 1.7 percent to C$40.45, Husky Energy (HSE.TO) fell 0.2 percent to C$26.98 and Canadian Natural Resources (CNQ.TO) was down 0.8 percent at C$70.78. Gold miner Kinross Gold (K.TO) was lower by 1 percent at C$18.82.

Investor sentiment was also hit by worries about a U.S. clampdown on financial regulation. [.N] ]

In Washington, several Republicans will vote with Democrats to wrap up debate on the sweeping reform of financial regulations and move toward final passage, Senate Majority Leader Harry Reid said. [ID:nN16148428]

Separately, Germany said it will ban “naked” short-selling from midnight in shares of the country’s 10 most important financial institutions. [ID:nN18512882]

In naked short-selling, a trader sells a financial instrument short, betting that it will fall, without first borrowing the instrument or ensuring that it can be borrowed, as would be done in conventional short-selling.

“It would simply limit the ability for a lot of U.S. investment banks to trade in these markets,” said Jean-Francois Dion, vice-president and portfolio advisor, Canadian equities, at RBC Dominion Securities.

“I would say it adds a layer of short-term uncertainty in terms of what other restrictions might be announced down the road, and how investors and banks might have to react to these rules.”

Germany’s ban on naked short-selling will also apply to credit default swaps on euro government bonds as well as euro government bonds.

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE finished the day down 48.49 points, or 0.41 percent, at 11,764.51, with seven of its 10 main sectors lower. Earlier, the TSX climbed 1 percent.

The euro plummeted to a four-year low against the U.S. dollar, heavily pressured by Germany’s announcement. [ID:nN18512882]

“It seems as though the entire world is transfixed in terms of what’s going on in Europe with regard to the euro,” said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.

“There seems to be so much uncertainty about where this situation will end and how it will get resolved that investors are trigger-happy. No one is taking anything other than a short-term view.”

Still, Canada’s financial sector charted its own course, managing to end the day up 0.01 percent, amid optimism over earnings reports due next week, said RBC’s Dion.

“The credit trends in Canada have been very favorable so there’s rising expectations in terms of what the numbers will look like. That’s what’s helping all the banks hold up nicely,” he said.

Royal Bank of Canada (RY.TO) rose 1 percent to C$60.09 and Bank of Montreal (BMO.TO) was up 0.9 percent at C$60.62.

The blue chip S&P/TSX 60 index .TSE60 closed 1.51 points lower, or 0.22 percent, at 693.97.

$1=$1.04 Canadian Additional reporting by Claire Sibonney; editing by Rob Wilson

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