* TSX drops 1.25 percent to 11,617.51
* Gold issues lead broad decline
* Strength in banks helps to cut losses, insurers weak (Adds new commentary, updates prices)
By Ka Yan Ng
TORONTO, May 19 (Reuters) - Toronto’s main stock index fell to its lowest level in more than a week on Wednesday, dragged down by battered gold and energy shares, in a retreat triggered by investor fears over Germany’s move to clamp down on speculative trading.
The TSX index was down for a fifth straight session as uncertain investors worried that Germany’s surprise ban on some riskier short-selling bets foreshadowed tighter financial regulation in other nations.
“It’s nothing Canada-specific. It’s all global macro (factors) and risk is being taken off the table,” said Francis Campeau, broker at MF Global Canada in Montreal.
“It’s fear, fear, fear.”
Gold fell below $1,200 an ounce as the metal was caught up in a selloff in financial markets. [FRX/] [GOL/]
The metal, which is traditionally seen as a safe store of value in times of volatility, has been hit by broad-based selling of other assets such as stocks and commodities. [ID:nLDE64I0SL]
Shares of gold miners were among the steepest losers, dragging the materials group down more than 4 percent. Shares of Kinross Gold (K.TO) shed 4.7 percent to C$17.94, while Goldcorp (G.TO) lost 4.6 percent to C$43.97. Agnico Eagle (AEM.TO) dropped 4.2 percent to C$62.04.
Additional pressure came on the back of an unexpected fall in April U.S. consumer prices, the first decline in a year. [ID:nN19219213]
“Gold stocks are weighing pretty heavy on the market. We saw a lower reading on the CPI data in the U.S. today,” said Youssef Zohny, associate portfolio manager, Van Arbor Asset Management in Vancouver.
“We’ve been seeing a few deflationary things out there. It doesn’t bode well for gold.”
At 12:30 p.m. (1630 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 147.00 points, or 1.25 percent, at 11,617.51.
The index was briefly higher on strength in banking issues after a negative start, but dropped more than 2 percent on gold weakness to hit its lowest level since May 7.
Few sectors were spared in the broad decline. The energy group lost 1.4 percent, held lower by sagging oil prices, with producers such as Suncor Energy (SU.TO) down 1.8 percent at C$30.74.
The hefty financials group managed to limit losses as the sector’s big banks are seen as relatively safe, said Campeau. The financials group was down 0.06 percent.
Canadian Imperial Bank of Commerce CM.TO rose 1.58 percent to C$73.41, while Bank of Montreal (BMO.TO) gained 0.54 percent to C$60.95. Royal Bank of Canada (RY.TO), the country’s biggest lender, was up 0.63 percent at C$60.47.
$1=$1.05 Canadian Editing by Rob Wilson