January 22, 2010 / 4:05 PM / 9 years ago

CANADA STOCKS-TSX hits six-week low on Obama plan aftershock

* S&P/TSX composite down 0.74 percent at 11,383.72

* Banks, miners lead index to six-week low (Adds details, quotes)

By Claire Sibonney

TORONTO, Jan 22 (Reuters) - Toronto’s main stock index hit its lowest level since Dec. 9 on Friday morning, as jittery markets from London to Tokyo retreated on a White House plan to impose tighter restrictions on banks.

Financial stocks were among the biggest drags on the TSX, with Royal Bank of Canada (RY.TO), the country’s largest bank, down 1.7 percent at C$53.28, leading the decliners. Toronto-Dominion Bank (TD.TO) was off 1.14 percent at C$61.56.

U.S. President Barack Obama, looking to advance his agenda after a key Democrat election loss this week, laid out proposals on Thursday to restrict banks’ financial risk-taking, which he blamed for helping cause the financial crisis.

“Markets hate uncertainty and this political flip-flopping. Even when analyzed, and the chances of passage are low, in a market that’s already sort of nervous, it has a very short-term effect of a few days sometimes,” said Paul Hand, managing director at RBC Capital Markets.

“From a short-term standpoint we’re starting to get to reasonably oversold conditions, so in the absence of something really concrete happening I would expect investors sometime by next week will try to tune out a lot of this rhetoric,” Hand said.

At 10:33 a.m. (1533 GMT) the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was down 85.38 points or 0.74 percent at 11,383.72 after falling more 1 percent earlier in the session to a six-week low.

On the positive side, gold miners were up as bullion prices firmed in early trade. Barrick Gold Corp (ABX.TO), the world’s largest producer, led the index’s gainers with a 1.15 percent rise to C$38.75.

While bullion firmed, gold prices have been under pressure over worries that Obama’s plans could diminish capital flows from banks, which have provided liquidity for gold and commodities investors. [GOL/]

Lingering concerns over demand for base metals prompted Goldman Sachs to downgrade the U.S. metals and steel sectors to “neutral” from “attractive,” saying the country’s credit tightening may further weigh on the stocks. [ID:nN22125044]

Canadian base metal miner Teck Resources TCKb.TO dropped 3.85 percent to C$38.21.

$1=$1.056 Canadian Reporting by Claire Sibonney; editing by Rob Wilson

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