CANADA STOCKS-TSX drops sharply on banking, Korea fears

* TSX falls 1.5 percent to 11,348.02

* Banking and energy issues drop steeply

* Golds advance from relative safety bid

* LIBOR rates at highest since July 2009
(Adds details)

TORONTO, May 25 (BestGrowthStock) – Toronto’s main stock index
dropped on Tuesday morning as worries over Europe’s banking
sector and North Korea’s threatened military action against the
South pulled financial and energy shares sharply lower.

Canadian banks, even with limited exposure to European
debt, were caught up in a global selloff of bank shares as
concerns mounted that the debt crisis could worsen after the
Bank of Spain rescued a local lender over the weekend.

Meanwhile, funding conditions for banks have been
tightening, with institutions in the United States increasingly
reluctant to deal with firms with large exposure to
Europe.

Three-month dollar LIBOR rates (USD3MFSR=: ) rose to their
highest level since late July 2009. [MMT/]

All of the index’s banks were sharply lower, led by Royal
Bank of Canada (RY.TO: ), the country’s biggest lender, down 2.1
percent at C$58.21, while No. 2 Toronto-Dominion Bank (TD.TO: )
fell 1.75 percent to C$70.25.

The sector, down nearly 2 percent, will be closely watched
in the short term as the banks are expected to report another
string of strong profits for their second quarter. Results
start coming in on Wednesday. [ID:nN25118426]

At 10:05 a.m. (1405 GMT), the Toronto Stock Exchange’s
S&P/TSX composite index (.GSPTSE: ) was down 173.33 points, or
1.5 percent, at 11,348.02. It fell more than 2 percent shortly
after the open.

Nine of the index’s 10 main groups were lower, with eight
showing declines of 1 percent or more.

“The selling is right across the board. I don’t see too
many sectors that are strong outside of a couple of gold
names,” said Bruce Latimer, trader at Dundee Securities.

The resource groups also saw deep declines to track a slide
in the price of oil towards $67 a barrel in reaction to the
possibility of military conflict between North and South Korea.
Metals such as copper, platinum and palladium also tumbled.

The nervousness stemmed from increasing tensions as North
Korea threatened military action if the South continued to
violate the waters off its west coast. [ID:nSGE64O03B]

The index’s energy group dropped 3.2 percent. Shares of
Suncor Energy (SU.TO: ) were down 3.3 percent at C$30.16, while
Canadian Natural Resources (CNQ.TO: ) was dragged 3.7 percent
lower to C$33.42.

Safe haven demand for gold kept the price of the precious
metal steady near $1,190 an ounce, and some gold-mining stocks
were among the key advancers. That made the materials group the
index’s lone rising sector, up 0.33 percent.

Barrick Gold (ABX.TO: ) gained 3.6 percent to C$44.95, while
Goldcorp (G.TO: ) rose 2.9 percent to C$44.63. Kinross (K.TO: ) was
up 2.3 percent at C$17.99, and Yamana Gold (YRI.TO: ) climbed 3.5
percent to C$10.98.

On the downside, base-metals miner Teck Resources (TCKb.TO: )
was down 5.24 percent at C$31.98 and fertilizer producer Potash
Corp (POT.TO: ) was off 1.9 percent at C$101.77.

First Quantum Minerals (FM.TO: ) sagged 16.5 percent to
C$52.40 after the miner suffered a new legal setback to its
Congo business with a court ruling to annul its rights to two
copper mines in the south of the country. [ID:nLDE64L0CZ]

Stock Market Advice

($1=$1.08 Canadian)
(Reporting by Ka Yan Ng; editing by Peter Galloway)

CANADA STOCKS-TSX drops sharply on banking, Korea fears