September 22, 2008 / 2:36 PM / in 9 years

UPDATE 1-Toronto stocks lower on uncertainty over bailout

*TSX opens lower following 7 percent rally on Friday

*Uncertainty over U.S. bailout package prevails

*Materials stocks rise on strength in gold, base metals

*Tanganyika jumps after it says in acquisition talks

(Adds details)

TORONTO, Sept 22 (Reuters) - The Toronto Stock Exchange’s main index opened slightly lower on Monday, pulled down by weakness in energy and financials shares as investors worried about a proposed $700 billion U.S. bailout plan.

The soft opening comes after news that two remaining major U.S. investment banks, Goldman Sachs GS.N and Morgan Stanley MS.N, sought refuge in the arms of the Federal Reserve and transformed into bank holding companies to survive a financial storm. [ID:nSP4331]

It is the latest move by Washington to provide solace in a cathartic market, and comes as investors are skeptical over the proposed bailout that needs approval from Congress. [ID:nN13574113]

The tentative picture comes after Toronto index soared to its biggest percentage gain since 1987, rising 7.03 percent to 12,912,99.

“I would say there’s still a lot of uncertainty out there as to the rescue package,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

“Some may take the view that even a rescue package will not cure the problems out there, and view as a good time to sell,” he added.

“Others will sit on the fence and say let’s look at the details because the devil are in the details. Is it going to be enough to mitigate the losses the banks have incurred?”

In choppy early activity, the S&P/TSX composite index .GSPTSE was down 51.18 points, or 0.4 percent, at 12,861.81, with nine of its 10 main groups lower.

For its part, the materials group was up 2 percent on strength on metals prices. Among the gainers in the sector, Agnico-Eagle AEM.TO 3.5 percent to C$67.30, while Barrick Gold ABX.TO 6.3 percent to C$38.80.

The heavily-weighted financial services sector slumped 0.3 percent.

Manulife Financial MFC.TO rose 2.4 percent to C$37.76 after the Globe and Mail newspaper said on Monday Manulife is among the global insurers poised to bid for parts of American International Group AIG.N, a major casualty of the U.S. credit crisis. [ID:nN22226017]

Canada’s largest provincial securities watchdog said late on Friday that it will follow other international authorities with a temporary ban on short-selling, a trading technique that bets certain financial stocks. [ID:nN19311825]

The heavyweight energy sector was down 0.9 percent, even as oil extended gains and rose to $108 a barrel on expectations that a comprehensive U.S. government plan would help shore up confidence in battered financial markets. [ID:nSYD356880]

In the oil patch, Tanganyika Oil Co Ltd TYK.TO, a top net gainer on the market, rose 29.4 percent to C$22.65 after the oil producer said it is in exclusive talks with a potential buyer of the company. ($1=$1.04 Canadian) (Reporting by Jennifer Kwan; Editing by Frank McGurty)

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