December 28, 2007 / 2:18 PM / in 10 years

Financials set to weigh down Toronto stocks

 TORONTO, Dec 28 (Reuters) - The Toronto Stock Exchange’s main index was expected to open lower on Friday, weighed down by worries over more fallout from the U.S. subprime market, as well as international political tensions.
 Financials, the largest sector on the index, could continue to see pressure following yesterday’s decline after a Goldman Sachs analyst said yesterday Citigroup Inc (C.N) might have to cut its dividend by 40 percent.
 Gavin Graham, chief investment officer at Guardian Group of Funds, said investors will be watching for more revelations of writedowns, which have already battered banking shares.
 “(A main factor) would have to be the continuing working out of the subprime mortgage situation, with which further shoes are going to drop because now obviously we’re getting to the stage where people are going to start to be making estimates for the writeoffs in this fourth quarter,” said Graham.
 In Canada, the sector has fallen nearly 9 percent as banks warned of writedowns due to the U.S. turmoil.
 Canadian Imperial Bank of Commerce (CM.TO), for example, said earlier this month that there was a probability it will report a large charge in its first-quarter results.
 But the sector could see some relief after a Wall Street Journal report said European and U.S. banks were considering raising capital by selling assets.
 The S&P/TSX composite index .GSPTSE kicks off the day at 13,675.57 following a small decline on  Thursday as advancing oil and gold prices were unable to offset weak financials.
 Investors will also be keeping an eye on political concerns, as global stocks slid amid uncertainty after Pakistani opposition leader Benazir Bhutto was assassinated.
 On the upside, resource shares could rise as the price of gold, traditionally seen as a safe haven for investors in times of turmoil, moved higher amid jitters over Pakistan and Iraq.
 Potash Corp of Saskatchewan Inc (POT.TO) (POT.N) will be in the spotlight the day after shares of the fertilizer company jumped to a year high after an upgrade from Goldman Sachs.
 Potash closed at C$142.99, off the year high of C$148.89, and a further advance could add support to the materials sector, which has climbed 7.6 percent in the past four days.
 Political tensions and a drop in U.S. fuel inventories also underpinned oil prices, keeping crude around $97 a barrel.
 South of the border, stocks looked likely to bounce back from Thursday’s fall, as stock index futures pointed to a higher open with investors looking to financial shares after the WSJ article.
  ($1=$0.98 Canadian)
  (Reporting by Leah Schnurr)   

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