December 18, 2008 / 10:33 PM / 10 years ago

CANADA STOCKS-TSX falls broadly with energy leading the way

* Toronto, TSX Venture exchanges open after Wednesday halt

* Energy leads TSX lower as oil falls well below $40

* Nine of 10 subgroups lower (Adds comment, details)

By Cameron French

TORONTO Dec 18 (Reuters) - Toronto’s main stock index fell nearly 300 points on Thursday as plunging oil prices hammered energy issues, while materials and financial stocks felt the sting of deepening worries about the health of the global economy.

With the exchange shut down on Wednesday due to technical problems, trading volumes soared to near-record levels as pent-up selling demand put heavy pressure on the the energy and materials sectors in particular.

Oil prices dropped to about $36 a barrel — on slumping demand and swelling U.S. inventories, building on a sharp drop from the previous day that had not been factored into Toronto-listed stocks.

The energy sector dropped 7.2 percent, while materials issues retreated 5.7 percent as gold stocks on other exchanges were also weaker on Wednesday.

Oil and gas producer Nexen NXY.TO fell 8 percent to C$20.58, while Goldcorp dropped 12.4 percent to C$34.49.

All told, the S&P/TSX composite index .GSPTSE fell 298.76 points, or 3.42 percent, to 8,425.35.

Trading volume was 784.3 million shares, about double normal levels and falling just short of the record of 862.3 million.

“What we saw was really a 2-for-1 day today, so that has exaggerated the moves in some of the stocks,” said John Ing, president of Toronto investment dealer Maison Placements.

Pre-market tension focused not just on where stocks would open, but whether trading would begin at all, as the previous day’s unexpected shutdown frustrated users and sent some investors to rival markets.

Tom Kloet, chief executive of exchange owner TMX Group (X.TO), issued an apology shortly after trading on both the main exchange and the junior Venture exchange began, saying “all efforts are being made to ensure that such a disruption in trading does not happen again.”

TMX shares slipped 1.6 percent to C$24.21.

All but one of the 10 TSX subgroups weakened on Thursday as investors were spooked by signs of a deepening economic slump.

Canada’s government predicted on Wednesday that Canada’s economy will contract next year and said Ottawa would run a budget deficit.

Even the sharp decline in oil, actually a positive for most industries, is being taken as a negative economic sign, said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.

“If oil prices are down this much, what does it tell you about how bad everything else is going to be?” she said.

Financials retreated 1.75 percent, led by National Bank of Canada (NB.TO), down 7.7 percent at C$25.62, and IGM Financial (IGM.TO), which slid 3.1 percent to C$28.60.

U.S. stocks fared better than the TSX, but still weakened.

The Dow Jones industrial average .DJI dropped 219.35 points, or 2.49 percent, to 8,604.99, while the Nasdaq composite .IXIC slid 26.94 points, or 1.71 percent, to 1,552.37.

$1=$1.21 Canadian Reporting by Cameron French; editing by Peter Galloway

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