May 22, 2008 / 9:23 PM / in 9 years

UPDATE 3-BCE, oils hold Toronto stocks back to end flat

(Adds details, quotes)

*TSX ends little changed as energy shares fall

*BCE dives after court ruling raises fears over its buyout

*Bargain-hunting in financial shares gives support

By Leah Schnurr

TORONTO, May 22 (Reuters) - The Toronto Stock Exchange’s main index finished nearly flat on Thursday, pressured by weak energy shares, while BCE Inc (BCE.TO) was hammered by concerns that a court decision could put an end to its buyout.

Shares of BCE, Canada’s biggest telecom company, slumped C$4.48, or 12.1 percent, to C$32.64 after a Quebec court backed debtholders who said that the buyout deal was unfair to them. The transaction, worth C$34.8 billion ($35.2 billion), is the world’s largest leveraged buyout.

BCE stock was halted by the TSX in the afternoon, pending clarification of the status of orders. The exchange said there had been a service disruption for about 45 minutes in the morning, which caused “data integrity concerns”.

The telecom company’s stock was the most actively traded by far at 26.3 million shares.

The S&P/TSX composite index .GSPTSE eked out a tiny gain of 1.99 points, or 0.01 percent, to 14,792.36 with all but three of its 10 sectors drifting higher.

Levente Mady, a broker at MF Global Canada in Vancouver, said that the appeals court ruling came as a surprise to many, “so that’s certainly why you’re seeing that big reaction in the market.”

With uncertainty already surrounding the BCE deal and its financing, “I don’t know if it was actually going to happen anyway, but the fact that the court has surprised the participants certainly doesn’t help any,” Mady added.

The telecoms sector was slid 1.2 percent. Telus Corp (T.TO), which had been in talks with BCE before the group led by the Ontario Teachers’ Pension Plan emerged as the winner, was off 24 Canadian cents, or 0.5 percent, to C$47.68.

Also in the telecoms space, Manitoba Telecom Services MBT.TO rose after it said it had dissolved a consortium that was formed to bid in an upcoming wireless spectrum auction. MTS was up C$1.44, or 3.6 percent, to C$41.65.

Energy companies tumbled 1.1 percent as oil prices retreated after climbing to another record over $135 a barrel. Canadian Natural Resources (CNQ.TO) was down C$1.83, or 1.8 percent, at C$102.10, and Imperial Oil (IMO.TO) gave up C$1.14, or 1.9 percent, to C$59.28.

Financials provided the benchmark with some support, rallying back from three days of declines as investors looked for bargains. Canadian Imperial Bank of Commerce (CM.TO) was up C$2.00, or 2.8 percent, at C$73.51, and Toronto-Dominion Bank (TD.TO) rose C$1.39, or 2.1 percent, to C$68.49. Overall, the sector rose 1.5 percent.

“I think we’ve had a fair number of bad news stories coming out in the last month or two, and I think they’re slowing down,” said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc. in Vancouver.

Mastracci added that while the market will see more fallout stemming from problems in global credit markets and the U.S. housing sector, investors seem to be taking comfort in the slowdown of bad news.

Shares of gold producers lost some luster, sliding 0.9 percent. Goldcorp (G.TO) fell C$1.07, or 2.5 percent, to C$41.29, and Kinross Gold (K.TO) dropped 55 Canadian cents, or 2.6 percent, to C$20.49.

But the larger materials group managed to inch up 0.2 percent, helped by Potash Corp of Saskatchewan (POT.TO), which rose C$4.80, or 2.5 percent, to C$196.80.

Market volume was a hefty 402 million shares worth C$9.3 billion. Decliners outpaced advancers 953 to 666. The blue chip S&P/TSX 60 index .TSE60 closed up 0.54 point, or 0.06 percent, at 882.98.

In New York, stocks were slightly higher following two sessions of sharp declines, helped in part by optimism over an $11 billion bid for power producer Calpine Corp (CPN.N) from NRG Energy Inc (NRG.N), and by easing crude prices.

The Dow Jones industrial average .DJI closed up 24.43 points, or 0.19 percent, at 12,625.62, and the Nasdaq composite index .IXIC rose 16.31 points, or 0.67 percent, to 2,464.58. ($1=$0.99 Canadian) (Editing by Rob Wilson)

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