January 23, 2008 / 3:51 PM / in 10 years

UPDATE 2-Toronto stock index cuts loss, still down 1.1 pct

(Updates with analyst comment)

TORONTO, Jan 23 (Reuters) - The Toronto Stock Exchange’s main index pared half of its earlier loses on Wednesday as positive results from Canadian National Railway CNR.TO helped to offset fears of a slowing global economy.

The prospect of a U.S. recession pushed seven of the TSX’s 10 main sectors lower, with materials down 1.9 percent and energy down 2.1 percent.

With the exception of spot gold, commodity prices eased across the board, taking a cue from equity markets in Europe and North America. U.S. crude oil was off nearly $1, just above $88 a barrel.

The S&P/TSX composite index .GSPTSE was down 135.23 points, or 1.1 percent, at 12,505.65 at midmorning. It was down as much as 310 points shortly after trading began.

On Monday, the TSX dropped more than 600 points, but on Tuesday it rose more than 500 points after the U.S. Federal Reserve slashed interest rates by 75 basis points.

“But (the rate cut) was only an intervention, a short-term fix to a much bigger problem. It’s not the economy suggesting things are going well,” said Beste Alpargun, vice president of equity research at Citadel Securities, in Halifax, Nova Scotia.

Adding further credence to the perception of a slowing economy, Canada’s composite leading indicator fell by 0.1 percent in December. For details, see: [nN23613317]

A mixed bag of stocks represented the biggest weighted losers on Wednesday.

BlackBerry-maker Research In Motion RIM.TO led the charge, down C$6.18 at C$87.10. Manulife Financial MFC.TO fell 44 Canadian cents to C$35.50, and fertilizer producer Potash Corp of Saskatchewan POT.TO dropped C$4.37 to C$122.51.

CN Rail, which reported a higher fourth-quarter profit late on Tuesday, jumped C$2.09 to C$46.98. For details, see: [nN22549127]

The TSX index is off nearly 10 percent so far this year. It is down nearly 15 percent from its record high of 14,646.82, reached in July.

$1=$1.03 Canadian Reporting by Jonathan Spicer; Editing by Peter Galloway

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