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Young people look for jobs at a summer employment centre in Toronto. (The Globe and Mail/Fred Lum)
Young people look for jobs at a summer employment centre in Toronto. (The Globe and Mail/Fred Lum)

At midday: Markets stay deep in the red Add to ...

The Toronto stock market kicked off June trading with a sharp loss Friday and commodity prices hit fresh multi-month lows amid data showing a big drop in U.S. job creation last month and a further slowing of China’s economy.

The S&P/TSX composite index fell 161.79 points to 11,351.41 while the TSX Venture Exchange lost 5.85 points to 1,283.89.

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The U.S. Labour Department said the American economy only managed to create 69,000 jobs last month, far below the modest expectation for 158,000 jobs. The jobless rate edged up 0.1 of a point to 8.2 per cent.

The dismal employment data again reminded investors that the recovery from the 2008 financial collapse and subsequent recession remains slow.

“The job growth is disappointing but it is growth nonetheless so it is all consistent with that,” said Robert Gorman, chief portfolio strategist at TD Waterhouse, who observed that recessions associated with credit crises are longer and deeper than average.

“But it is frustratingly slow — and that’s perhaps the operative phrase here — it’s a frustratingly slow grind as we gradually get out of the credit crisis.”

The TSX and the dollar also failed to find lift from another report showing Canadian economic growth met expectations for the first quarter, rising at an annualized rate of 1.9 per cent.

But the report showed Canadian economic growth faltered at the end of the quarter, with March growth coming in at 0.1 per cent, lower than the 0.3 per cent reading economists expected.

The loonie was off session lows, down 0.72 of a cent to 96.09 cents US after earlier falling a cent to its lowest level since last November.

U.S. markets retreated as the Dow Jones industrial average plunged 219.67 points to 12,173.78, leaving the blue chip index under water for the year.

The Nasdaq composite index was down 60.25 points to 2,767.09 and the S&P 500 index slid 25.79 points to 1,284.54.

Markets were already poised for a rough ride Friday after China’s state-affiliated Federation of Logistics and Purchasing had earlier reported that its purchasing managers index, or PMI, fell 2.9 percentage points to 50.4 per cent in May, just above the 50 level that signifies expansion. The index was at 53.3 in April.

And HSBC’s index, which is adjusted for seasonal conditions and is more weighted toward export manufacturers, fell to 48.4 in May from 49.3 in April.

The European debt crisis is pinching China’s export manufacturers, while moves to control property prices have chilled spending on construction. Some analysts said the surveys suggest China’s economic growth will fall below eight per cent in the second quarter.

This was a double shot of bad news as China has been an important element in helping the global economy recover from the recession that followed the 2009 financial collapse.

The energy sector led losses, down 3.36 per cent as crude prices fell below the US$84 a barrel level after worries about a slowing global economy, the eurozone crisis and a higher U.S. dollar combined to drive oil down 17 per cent last month.

The July contract on the New York Mercantile Exchange fell $3.16 to US$83.37 a barrel. Suncor Energy (TSX:SU) fell 70 cents to US$27.33 and Canadian Natural Resources (TSX:CNQ) gave back $1.32 to $28.34.

The base metals sector also gave back gains, down 2.25 per cent as the July copper contract on the Nymex fell four cents to US$3.32 a pound after dropping 12.43 per cent in May. Copper is widely viewed as a key economic barometer as it is used in so many industries and China has been the biggest purchaser of the metal. Teck Resources (TSX:TCK.B) lost 53 cents to $30.41 while First Quantum Minerals (TSX:FM) shed 51 cents to $17.58.

The financials sector was also a major weight, down 2.65 per cent with TD Bank (TSX:TD) $2.16 lower to $76.91 while CIBC(TSX:CM) lost $1.37 to $70.70.

The gold sector limited TSX losses, up 5.6 per cent as bullion prices turned positive after the jobs data with the August contract up $48.20 to US$1,612.40 an ounce. Goldcorp Inc. (TSX:G) jumped $3.17 to $40.87 while Barrick Gold Corp. (TSX:ABX) improved by $2.64 to $43.23.

Weak data from Europe was one more reason for traders to keep to the sidelines Friday. A survey on Europe’s manufacturing sector was decidedly downbeat, falling to 45.1 points, with the measure for Germany, which had grown steadily throughout the debt crisis of the past two years, hitting a 35-month low of 45.2.

Analysts said the figures suggested the region would experience an even deeper economic downturn than previously forecast.

The gloomy data further darkened the mood among investors, who have been increasingly spooked by the possibility that the 17-country eurozone might break up.

The head of the European Central Bank drove home those concerns on Thursday when he told EU leaders that the currency union is unsustainable in its current form.

The euro fell almost seven per cent in May and hit a new two-year low of US$1.2322 before rising to $1.2421.

The likelihood of Greece leaving the euro grew in early May when parties opposed to the terms of the country’s financial rescue won at the polls. New elections are planned for next month.

This week, Spain became the new focus of the crisis after its borrowing rates soared to nearly seven per cent, a level that is considered unsustainable as worries grew about the stability of the country’s banks.

European bourses were sharply lower with London’s FTSE 100 index down 1.22 per cent, Frankfurt’s DAX down 3.73 cent and the Paris CAC 40 off 2.69 per cent.

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