Toronto's main index plunged in early dealing Monday morning as turmoil in the financial sector sparked a massive selling of commodity stocks and drove banking shares deep into negative territory.
Traders returned to their desks Monday to find that troubled Wall Street institution Lehman Brothers (LEH) declared Chapter 11 bankruptcy after being unable to find a white knight over the weekend.
Bank of America (BAC) backed away from talks to buy Lehman, instead acquiring Merrill Lynch (MER) for $50 billion in an all-stock transactions.
The developments sent shock waves through equities markets around the world. The S&P/TSX Commodities Index plummeted 335 points to 12,434.11, wiping out most its gains from the previous three sessions and moving toward last Tuesday's multi-month lows.
Commodity prices dropped sharply as investors looked for safer havens to park their money in the wake of the historic shift on the financial landscape. Base metal stocks are down 4.7 percent, with Thompson Creek (TCM.TO) dropping 7 percent.
The price of oil continued its downward slide on Monday, dropping $6 to $95 a barrel in early dealing amid demand concerns and after Hurricane Ike spared Texas coast oil operations. Energy stocks are down 4 percent, with Nexen (NXY.TO) falling 7.3 percent.
Financials are extending their losses from the previous few sessions, dropping more than 2 percent. All of Canada's big six banks are in the red.
Overshadowed by Lehman's demise and Merrill's fire sale, reports indicated that embattled insurance giant American International Group Inc. (AIG) is scrambling to secure capital from private equity firms Kohlberg Kravis Roberts & Co. LP and J.C. Flowers & Co. in a bid to thwart credit downgrades.
For comments and feedback: editorial@rttnews.com