July 24, 2008 / 9:20 PM / 11 years ago

UPDATE 3-Toronto stocks tumble as banks get hit hard

(Adds details)

*TSX slumps more than 2 percent in broad selloff

*Banks weigh following recent strong rally

*Aurelian Resources rises after bid from Kinross Gold

By Leah Schnurr

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. Agnico-Eagle was down C$5.02 at C$59.78, while fertilizer producer 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.

Synenco Energy SYN.TO shot up 14 percent after French energy group Total (TOTF.PA) sweetened its takeover bid for the oil sands start-up to about C$530.5 million. Synenco rose C$1.25 to C$10.21.

Investors took in a round of corporate results, including Nova Chemicals NCX.TO, which posted a drop in profit due to one-time charges and soaring energy costs. Nova ended down C$1.29, or 4.8 percent, at C$25.36.

Market volume was 475 million shares worth C$11.4 billion. Decliners outpaced advancers 999 to 533. The blue chip S&P/TSX 60 index .TSE60 closed down 19.95 points, or 2.47 percent, at 788.57.

On Wall Street, stocks also fell as investors sold off financial shares following the drop in home sales. The Dow Jones industrial average .DJI closed down 283.10 points, or 2.43 percent, at 11,349.28, and the Nasdaq Composite Index .IXIC lost 45.77 points, or 1.97 percent, to 2,280.11. ($1=$1.01 Canadian) (Editing by Peter Galloway)

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