July 24, 2008 / 8:40 PM / 11 years ago

UPDATE 2-Toronto stocks sink 2 pct as financials drag

(Updates closing numbers, adds details, quotes)

*TSX slumps more than 2 percent in broad selloff

*Banks weigh following recent strong rally

*Aurelian Resources rises after bid from Kinross Gold

TORONTO, July 24 (Reuters) - The Toronto Stock Exchange’s main index sank more than 2 percent on Thursday in a broad decline sparked by losses in financial-services shares as sour data highlighted concerns over the U.S. economic outlook.

Agnico-Eagle Mines (AEM.TO) was among the biggest decliners by weight, losing 7.8 percent, after it reported a weaker than expected quarterly profit, a lower production outlook for the year, and warned of a jump in project costs over the next two years.

All of the major banks were down, including Canadian Imperial Bank of Commerce, which lost 5.9 percent. The financial-services sector dropped back from this past week’s strong rally, taking its cue from U.S. bank stocks, which fell after data showed a drop in sales in existing U.S. homes.

Before Thursday’s losses, the sector - which had been beaten down by the fallout from the credit crunch and U.S. housing slump - jumped more than 16 percent over six sessions, helped by better than expected bank results south of the border.

“There seems to be a little bit of scepticism today as to whether this financial run was just a spike out of a short-covering maneuver or whether it was a good, solid, sustained move upward,” said Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management Ltd, in Calgary.

Kerkovius added that he felt the movement was a sustained one, as short-covering wouldn’t have moved the sector up so much.

The S&P/TSX composite index .GSPTSE closed down 306.52 points, or 2.27 percent, at 13,206.14, its third negative session in a row. All of its 10 main sectors ended the day lower.

The financial sector was down 4.1 percent, with CIBC falling C$3.71 to C$59.58, while Toronto-Dominion Bank (TD.TO) lost C$3.18, or 5 percent, to C$60.04.

The materials sector fell 2.1 percent, weighed down by losses in fertilizer companies and miners. Miner Agnico-Eagle was down C$5.02 at C$59.78, while fertilizer Potash Corp of Saskatchewan POT.TO fell C$5.38, or 2.7 percent, to C$196.85 after gaining in the morning.

Potash Corp upped its 2008 financial forecasts on Thursday and reported second-quarter earnings that more than tripled as record grain markets fueled demand for fertilizer.

Shares of Aurelian Resources ARU.TO jumped 41.8 percent, or C$1.86, to C$6.31 after Kinross Gold (K.TO) said it will buy the company for just over C$1 billion ($990 million) in a friendly deal.

Kinross was down C$2.14, or 10.3 percent, at C$18.70, hurt in part by the uncertainty surrounding Aurelian’s big Fruta del Norte gold discovery in Ecuador, which Kinross is set to take over. ($1=$1.01 Canadian) (Reporting by Leah Schnurr; Editing by Peter Galloway)

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