September 25, 2008 / 3:50 PM / 10 years ago

UPDATE 2-Toronto stocks sink lower as resources slide

* Energy, materials fall on weakness in commodities

* Tanganyika Oil rises sharply after bid by Sinopec

* RBC sags after report says bank part of SEC probe (Adds details)

TORONTO, Sept 25 (Reuters) - The Toronto Stock Exchange’s main index sank on Thursday morning as weakness in energy and materials issues offset optimism that the U.S. Congress might be close to agreeing on a rescue plan for the country’s battered financial industry.

The hopes for the $700 billion bailout deal were tempered by gloomy U.S. manufactured goods and weekly jobless data See [ID:nN25327565], however, and a profit warning from U.S. economic bellwether General Electric (GE.N) [ID:nSP335584], said Rick Hutcheon, president and chief operating officer at RKH Investments.

“We’re seeing a lot of directionless trading right now,” said Hutcheon.

“Until we have a good feeling of the when and the how this deal is going to get done in the States you’ll see the markets, and the sectors within those markets, just drift.”

At around 11:35 a.m. EDT (1535 GMT), the S&P/TSX composite index .GSPTSE was down 89.03 points, or 0.71 percent, at 12,424.33, with six of its 10 main groups lower.

The energy and financial services sectors sank 0.4 percent 0.3 percent respectively.

In the oil patch, Tanganyika Oil Co Ltd TYK.TO rose 11 percent to C$28.87 after Chinese oil firm Sinopec Group agreed to buy the small producer of heavy oil in Syria in a deal valuing the company at C$2.07 billion. [ID:nHKG194242]

In financials, Royal Bank of Canada (RY.TO) slipped 1.5 percent to C$51.48 after the National Post newspaper said Canada’s biggest bank was on a U.S. Securities and Exchange Commission list for an investigation into the collapse of the auction-rate securities market.

The newspaper said authorities are cracking down on financial institutions amid mounting public anger over the bailout plan for Wall Street banks. [ID:nN25511412]

The resource-laden materials group fell 3.4 percent on weaker metals prices. Barrick Gold (ABX.TO) dropped 4.5 percent to C$38.17, while Potash Corp of Saskatchewan POT.TO 4 percent to C$161.25.

Elsewhere, Macdonald Dettwiler & Associates Ltd MDA.TO plunged 16.9 percent to C$22.79, a day after the aerospace and real estate data services firm warned that a downturn in the British housing market would eat into its third-quarter profit. [ID:nN25507419]

In merger news, Medtronic Inc (MDT.N) will buy CryoCath Technologies Inc’s CYT.TO in a deal with a total equity value of about C$400 million, the biotech companies said. [ID:nBNG368035] CryoCath shares soared to C$8.49, almost doubling their Wednesday closing price of C$4.44. ($1=$1.03 Canadian) (Reporting by Jennifer Kwan; editing by Rob Wilson)

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