Financial Update

TSX falls below 13,000 in commodities sell-off-its worst 3 day drop in almost 8 years
· TSX -323.58pts to 12,814.14 as a massive sell-off spearheaded by commodity stocks sent the TSX to a steep triple-digit plunge
· Dow -344.65pts as glum economic and retail data further discouraged investors looking for a rally in the second half of 2008 (CP)
· Dollar -.75c to $93.50US .
· Oil -$1.46 to $107.89US per barrel
· Gold -$4.80 to $797.90US per ounce

Toronto stocks dive for third day on growth woes

Alia McMullen, Financial Post

TORONTO - The TSX slid to its lowest level in almost six months on Thursday after smashing through the 13,000 level to cap its worst three-day point drop in almost eight years.

Strategists said the market was beginning to fear the worst for the global economy ahead of the U.S. payrolls figures due Friday morning, with preliminary data on Thursday pointing to an eighth straight drop in U.S. employment.

"The idea that the rest of the world's growth is going to be slowing is sinking in and that's why we're seeing a more broad-based slowdown as opposed to just the financials versus commodities type trade," said George Vasic, strategist at UBS.

The S&P/TSX composite index dropped 323.58 points, or 2.5%, to close at 12,814.14.

Since traders returned from the Labour Day holiday on Monday, the index has lost about 7% of its value, or 957.11 points, to close below the 13,000 level for the first time since March 20.
It was the biggest three-day percentage drop since Jan. 19 this year and the largest three-day point decline since Oct. 27, 2000.

Mr. Vasic said that the drop in the Toronto market was largely in line with an unwinding of the run-up in oil prices that followed the collapse of investment bank Bear Stearns Cos. Inc. in March.

He said the run-up in oil appeared to have more to do with a flight to safety from financial stocks rather than a reflection of global oil supply and demand conditions.

Light crude fell US$1.46 to close at US$107.89 on the New York Mercantile Exchange yesterday, while gold was also down US$5 to US$799.30. The Canadian dollar also weakened, slipping three-quarters of a cent to US93.5¢. Meanwhile, the S&P 500 composite index fell 38.15 points, or 3%, to 1,236.83 and the Dow Jones Industrial Average dropped 344.65 points, or 3%, to 11,188.23.

Compounding the impact of the pull-back in oil were the expectations of slower U.S. and global economic growth. Weekly U.S. initial unemployment claims yesterday rose more than expected ahead of this morning's official U.S. non-farm payrolls numbers. The market expects the economy to lose a further 75,000 jobs in August.

Mr. Vasic said a better than expected result would likely give only a temporary boost to stocks. However, he expects the longer-term picture for the TSX to improve and likely break above recent highs next year.

Dan Hallett, president of Dan Hallett & Associates said the number of cheap stocks available in the market had risen in recent weeks, providing good long-term buying opportunities. But in the meantime, he said fears of a recession in the U.S. and the possible collapse of another financial institution were plaguing the market.

"The fact is, the worse the U.S. economy gets, the worse it is for Canada, you can't disconnect the two," Mr. Hallett said. He said there also appeared to be a number of hedge funds having to dump stocks to either cover short positions or make redemptions, adding to the large daily stock market declines.

The steep drop in commodities has put pressure on some financial managers, such as Ospraie Management LLC, which was forced to close its biggest hedge fund after it slumped almost 39% this year.