TORONTO (Reuters) - Toronto’s main stock index sank on Tuesday to its lowest level in seven weeks as resource issues slumped on falling oil and base metal prices, and as concerns grew over the global financial crisis.
The financial services sector led the TSX lower, closing down 6.4 percent, its steepest one-day percentage loss since the beginning of December.
Heavily weighted stocks on the downside included insurer Manulife Financial, down 10.6 percent to $15.67, and Royal Bank of Canada, which fell 5.5 percent to $28.15.
Further concerns about the financial sector were sparked after two leading agencies, including a report from Moody’s Investors Service, warned about growing risks to European banks as the recession deepens.
That added to an already gloomy tone in the sector, said Francis Campeau, broker at MF Global Canada, in Montreal, adding that there appear to be “no buying catalysts”.
“Going forward, we expect banks’ income to decrease,” he said. “Forward earnings per share are getting repriced and current dividends are unsustainable.”
The energy group also pressured the TSX lower, falling 5 percent as the price of oil dropped 7 percent to below $35 a barrel on demand concerns.
EnCana Corp fell 5.2 percent to $51.30, while Suncor Energy dropped 7 percent to $22.82.
The Toronto Stock Exchange’s S&P/TSX composite index closed down 299.40 points, or 3.45 percent, at 8,378.70, with nine of its 10 main sectors lower. At one point, the resource-laden index touched its lowest level since December 29. On Monday, the market was closed for a public holiday.
The lone sector in positive territory was the resource-laden materials group, up 0.5 percent, as gold prices got a boost as investors sought refuge from economic gloom.
Goldcorp climbed 3.4 percent to C$40.45, while Barrick Gold rose 1.1 percent to $47.19. Kinross shot up 4.6 percent to C$24.39.
Grim U.S. housing and factory data helped to dampen the mood in North American equity markets, while market sentiment was also hit by data that showed Japan’s economy sank deeper into recession in the fourth quarter.
The market was also under pressure ahead of the Tuesday deadline for two of Detroit’s Big Three automakers to submit restructuring plans.
“They were historically considered a bellwether for the health of the U.S. economy and the fact that they are repeatedly back to U.S. regulators for a lifeline ... is tremendously disconcerting,” said Paul Taylor, chief investment officer at BMO Harris Investment Management Inc.
A UBS analyst said Air Canada could be forced to file for bankruptcy protection if it does not secure additional financing and succeed in renegotiating covenants in credit card agreements. Air Canada fell 12.8 percent to $1.29.
Elsewhere, copper and zinc producer Teck Cominco fell 9.8 percent to $4.44 after it reporter a quarterly loss and as investors worried about the outlook for the company’s coal sales.
The blue chip S&P/TSX 60 index closed 19.77 points lower, or 3.79 percent, at 501.36.
Reporting by Jennifer Kwan; editing by Rob Wilson