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Oil price drop knocks TSX lower

27/05/08

TORONTO (Reuters) - Toronto stocks fell on Tuesday as weak gold prices and a sharp drop in oil prices weighed on the resource-heavy market.

The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> was down 180 points, or 1.2 percent, at 14,578.09 after touching a low of 14,559.53 earlier in the session..

Four of the TSX index's 10 main groups were lower, led by a 2 percent drop in the influential energy group and a 2.8 percent drop among gold issues.

"Finally we have a break in the oil prices and that's the key," said Sal Masionis, a stockbroker at Brant Securities. "Oil has just gone through the roof and probably beyond where it should be."

Energy shares, which account for about 30 percent of the overall index, were knocked off peak levels as a rising U.S. dollar more than offset worries over a rebel attack on Nigerian oil facilities. U.S. crude oil dropped 1.9 percent to $129.75 a barrel.

Suncor Energy was off C$1.80 at C$69.44, while Talisman Energy , which rose on reports in the previous session that CNOOC Ltd <0883.HK>, China's third-largest oil company, was in talks to buy some of its assets, slipped 86 Canadian cents to C$23.84.

Materials shares were pulled lower by gold companies amid a lower gold price. Goldcorp slipped C$1.37 to C$39.93 and Agnico-Eagle Mines dropped C$1.84 to C$68.40.

Elsewhere in the material sector, market heavyweight Potash Corp dropped C$6.38 to C$189.50.

Bank issues slipped 0.5 percent as investors digested Bank of Montreal's second-quarter results, which showed that profits fell 3 percent due partly to weaker capital markets.

BMO dropped 20 Canadian cents to C$48.90, while Bank of Nova Scotia , also set to report on Tuesday, was off 17 Canadian cents at C$48.05.

Tempering the declines was a 0.7 percent boost from the telecom sector, led by BCE Inc .

The company added C$1.25 to C$35.01 after the Supreme Court of Canada said a day earlier it may hear an appeal of a lower court decision that threatens the C$34.8 billion ($35.2 billion) buyout of the company.

($1=$0.99 Canadian)

(Reporting by Scott Anderson; Editing by Bernadette Baum)

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