Toronto's main stock index sagged more than 1 percent on Tuesday as resource prices came under pressure on news that China's central bank was tightening monetary policy at a faster than expected pace. In its strongest step yet, China rocked global financial markets with a surprise increase in commercial banks' required reserves, a move that pushed gold to a session low, and knocked down commodity currencies, including the Canadian dollar, against the greenback.
"China's decision to change some of the banking structure with bigger deposits certainly had an effect in terms in trying to cool some of the demand," said Brian Pow, vice president, research, and equity analyst at Acumen Capital Partners in Calgary.
The Toronto Stock Exchange's S&P/TSX composite index ended down 126.95 points, or 1.06 percent, at 11,820.18. All the gains made in the first sessions of the new year, which included a brief rally above 12,000, were within about 20 points of being wiped out at one point during the day. The index ended 2009 at 11,746.11. Nine of the index's 10 main groups were lower, led by a 2.88 percent fall in materials and a 1.39 percent tumble in energy.
Energy shares fell as the price of oil headed down towards $80 a barrel from near a 15-month high, while mining shares sagged on a weakening price for bullion. Suncor Energy was down 1.8 percent at C$37.87. Gold mining companies such as Barrick Gold, off 2.5 percent at $41.92, also weighed.