* TSX falls 123.14 points, or 1.03 percent, to 11,886.65
* Energy stocks lead decline as oil price eases
* Shares of most banks fall despite solid results
By Alastair Sharp
TORONTO, Aug 30 Canadian stocks dropped sharply
on Thursday as investors pared back expectations the U.S.
Federal Reserve will signal a new round of economic stimulus,
brushing off surprisingly robust earnings from three of the
country's big banks.
All ten of the benchmark index's main sectors were lower
ahead of the much anticipated speech by Fed Chairman Ben
Bernanke at a meeting of central bankers in Jackson Hole,
Wyoming on Friday.
"The market is expecting that we won't necessarily get
anything definitive tomorrow out of Jackson Hole, or if we do,
that it's already reflected in equity valuation levels," said
Paul Taylor, the chief investment officer of fundamental
equities at BMO Asset Management.
The Toronto Stock Exchange's S&P/TSX composite index
closed down 123.14 points, or 1.03 percent, to
11,886.65. It was the biggest one-day fall for the index since
The index at one point hit 11,875.05, its weakest level
since Aug. 15.
Limp data on the U.S. labor market coupled with signs that
consumer spending remains steady added to the pessimism as it
neither pointed to a robust recovery nor a bleak environment in
which the Fed would be forced to act.
"In some ways you hope that economic data is weak enough
that it forces the Fed's hand. The risk is that it's a little
bit better than awful and therefore the Fed is not compelled to
intervene," Taylor said.
ENERGY LEADS DECLINE
Toronto stocks were led lower by a 1.5 percent decline in
energy shares that followed a drop in U.S. crude prices. U.S.
crude fell as oil companies assessed damage after Hurricane
Isaac's trek through the region.
Financial stocks were among the biggest weights even though
three big Canadian banks reported better-than-expected results
and dividend increases on Thursday.
The sector had enjoyed a two-day rally after Bank of Nova
Scotia and Bank of Montreal upped their dividends and beat
profit estimates earlier in the week.
However, Bank of Nova Scotia fell 2.4 percent to
C$52.30 after it said late on Wednesday it would buy ING Groep's
Canadian online bank for C$3.1 billion.
Toronto-Dominion Bank was down 1.1 percent at
C$80.65 on Thursday even though it narrowly beat expectations
for quarterly profit and raised its dividend by more than
Canadian Imperial Bank of Commerce dropped 1.4
percent to C$75.35 even as it said profit rose 42 percent on
higher lending volumes.
But Royal Bank of Canada, the country's largest
lender, bucked the trend, rising 0.66 percent to C$54.96 after
it announced a surprise hike in its dividend on the back of a 73
percent rise in profit.
"On the whole, the core Canadian banking franchises are
still relatively stable and intact," said Gareth Watson,
vice-president for investment management and research at
"Credit quality is not deteriorating too quickly, although
in this environment it's not improving too markedly either," he
Analysts said investors were also looking ahead to a
European Central Bank meeting next week at which President Mario
Draghi is expected to flesh out his plans to buy euro bonds. His
hints at such a move in August was credited with helping steady
"Europe is the problem, and that's where we need some
solutions for other places around the world to feel more
comfortable," Watson said.