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IMF warnings hit TSX Add to ...

The slight retreat in commodity prices is sure having a big impact on the commodities-heavy S&P/TSX composite index. The index was down more than 210 points, or 1.5 per cent, in late afternoon trading on Monday, putting it on track to produce its worst one-day setback in a month.

Materials and energy stocks were the main culprits in the selloff. Both indexes - which, together represent about half of the benchmark index in their combined weightings - were off more than 2 per cent. Crude oil fell to $110.14 (U.S.) a barrel in New York, down $2.70. Gold fell to $1,468 an ounce, down $6.

The declines simply take these commodities back to levels hit last week during a remarkable run-up than had fuelled conflicting concerns about inflation and slowing economic growth. The International Monetary Fund received most of the blame for the commodity price reversals after it identified rising oil prices as a "key downside risk" to global growth.

The IMF cut its growth estimate for the U.S. economy to 2.8 per cent in 2011, down from a January forecast of 3 per cent.

"Fears have turned to commodity prices," said Olivier Blanchard, the IMF's chief economist, in a release. "Commodity prices have increased more than expected, reflecting a combination of strong demand growth and a number of supply shocks. These increases conjure the specter of 1970s-style stagflation, but they appear unlikely to derail the recovery."

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