February 27, 2009 / 4:03 PM / 10 years ago

CANADA STOCKS-TSX drops with oil price, Citigroup move

* Oils and financials lead TSX lower

* Citigroup weighs; U.S. to take common equity stake

* Bearish economic data adds to negative tone (Adds details)

TORONTO, Feb 27 (Reuters) - Toronto’s main stock index was more than 1 percent lower on Friday morning — following a three-session rally — as the price of oil fell and U.S. banking news pressured financial shares.

Among the biggest contributors to the index’s fall were insurer Manulife Financial (MFC.TO), down 6.7 percent at C$13.23, while Royal Bank of Canada (RY.TO) lost 2.7 percent to C$31.04. Oil company EnCana (ECA.TO) fell 1.9 percent to C$47.96, while Canadian Natural Resources (CNQ.TO) dropped 3.4 percent to C$40.26.

The index’s financials group dropped 2.6 percent on renewed nationalization fears after the U.S. Treasury Department said it will convert some of the preferred stock it holds in embattled lender Citigroup into common stock, a step that will give it a significant stake in the bank. [ID:nLR896909]

The financials group had bounced higher earlier this week on better-than-expected quarterly results at big Canadian banks.

“(The index is) reversing some of the positives over the last couple of days. The market didn’t seem to like (the news on Citigroup) and brought down the shares of financials,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

The price of oil slipped below $43 a barrel pulling the index’s big energy group down by about 1 percent after three days of gains.

At 10:10 a.m. (1510 GMT), the S&P/TSX composite index .GSPTSE fell 86.53 points, or 1.1 percent, to 8,100.29, paring early steep losses. At one point, the index had dropped as low as 8,005.09.

Seven of the index’s 10 main groups were lower.

The materials group rose 0.7 percent, propped up by gold miners, which rose with firmer gold prices. The precious metal rose in Europe as safe-haven buying amid fresh losses on equity markets lifted the metal from the two-week lows it hit earlier in the session. [ID:nLR645000]

Poor economic news added to the negative tone in Toronto. The U.S. economy contracted at its sharpest rate since early 1982 in the fourth quarter, revised data showed on Friday, while U.S. consumer confidence fell to a three-month low in February. [ID:nN27328979]

In Canada, the current account plunged into deficit in the fourth quarter for the first time in nearly a decade as the global financial crisis crippled demand for oil and other resources exported by the country. [ID:nN27257696] (Reporting by Ka Yan Ng; Editing by Peter Galloway)

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