August 25, 2008 / 9:34 PM / 10 years ago

UPDATE 3-Financial worries knock Toronto stocks lower

(Adds details, quotes)

* TSX slumps 1.2 percent in broad decline

* Financials weigh amid persistent credit jitters

* Maple Leaf hits 52-week low after meat recall

By Leah Schnurr

TORONTO, Aug 25 (Reuters) - The Toronto Stock Exchange’s main index gave up more than 150 points on Monday in a broad slump prompted by weak financials, as worries over growing fallout from the credit crisis rattled investor confidence.

Home-grown anxiety also weighed on the large financial sector as the major Canadian banks are set to report quarterly results this week. The group was down 1.9 percent.

Analysts said that expectations for the banks have been significantly lowered, and while they are optimistic there won’t be any nasty surprises, the results will be weaker than last year.

Bank of Nova Scotia (BNS.TO) and Bank of Montreal (BMO.TO) are set to kick off the round of reports on Tuesday. Scotiabank closed down 2 percent at C$47.64, while BMO also slipped 2 percent to close at C$44.06.

The sector was also caught in the downward momentum of U.S. banks as Credit Suisse cut American International Group’s (AIG.N) price target and earnings estimate, while Lehman Brothers LEH.N fell on speculation a bid by Korea Development Bank won’t happen. See: [ID:nSEO367339].

“Financials on both sides of the border, mainly in the U.S., are leading the parade of the red side today,” said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc in Vancouver.

The S&P/TSX composite index .GSPTSE closed down 158.33 points, or 1.18 percent, at 13,288.96, with all but one of its 10 main sectors lower.

“You need investor confidence that the financial system is intact and today it’s being questioned,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

“We seem to have a lack of faith in the financial institutions that we’ve come to rely on over the last 40 or 50 years,” Nakamoto added.

Maple Leaf Foods (MFI.TO) also dragged on the index as its stock sank after it expanded a recall of prepared meats associated with a food poisoning outbreak that has killed 12 people.

Maple Leaf, one of Canada’s largest food processors, closed down 10.2 percent at C$8.80 after hitting a 52-week low of C$8.62 earlier in the day. See: [ID:nN25507255].

Precision Drilling PD_u.TO fell 4.5 percent to C$21.24 after it said it will buy U.S.-based Grey Wolf Inc GW.A in a $2 billion friendly cash and stock deal. See: [ID:nN25495723].

The energy and materials sectors fell 0.7 percent and 1.1 percent, respectively. Suncor Energy (SU.TO) eased 1.7 percent to C$59.32, while Inmet Mining IMN.TO lost 4.3 percent to C$61.75.

The lone sector in positive territory was the small healthcare group, which rose 0.5 percent. Biovail Corp BVF.TO climbed 2.7 percent to C$11.08 after it gained approval for an expanded indication for its once-daily pain management drug Ralivia. See: [ID:nN25332552].

Market volume was 227 million shares worth C$3.9 billion. Decliners outpaced advancers 867 to 616. The blue chip S&P/TSX 60 index .TSE60 closed down 10.43 points, or 1.3 percent, at 793.59.

In New York, stocks fell sharply on credit concerns, while global growth worries stung big technology and industrial companies. The Dow Jones industrial average .DJI closed down 241.81 points, or 2.08 percent, at 11,386.25, while the Nasdaq composite index .IXIC lost 49.12 points, or 2.03 percent, 2,365.59. ($1=$1.05 Canadian) (Editing by Rob Wilson)

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