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The Globe and Mail

At midday: Weak energy sector pulls TSX lower

Fred Lum/The Globe and Mail

The Toronto stock market fell Friday amid a disappointing jobs report that showed the Canadian economy lost an unexpected 9,400 jobs in June.

The S&P/TSX composite index shed 2.29 points to 15,112.19, pulled down by weak energy, but countered by strong gold stocks.

The worse-than-expected jobs numbers also put pressure on the Canadian dollar, which fell 0.65 of a cent to 93.27 cents (U.S.).

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Statistics Canada said the jobs loss led to the unemployment rate rising one-tenth of a point to 7.1 per cent – the highest level since last December. Full-time employment rose by 33,500, partly making up for the loss of 43,000 part-time jobs.

Economists had expected another big month of job creation following May's gain of 25,800 jobs, but June resumed what has become a year-long trend of weak demand for workers. Economists had forecast that 24,000 jobs would've been created last month.

"We are seeing the economy slow down. We are seeing the housing sector slow down a bit. All those factors are going to cause further pressure on employment," said Sadiq Adatia, chief investment officer at Sun Life Global Investment.

"People are giving more credit to the economy than is justified. Partly because they are getting caught up with the fact that the market has done well in Canada, implying that the Canadian economy is doing well, and those are two different things."

Adatia said although there is underlying growth in the economy, employers generally remain cautious about hiring.

Meanwhile, Wall Street only saw small moves with no major economic data set for release in the U.S. The Dow Jones industrials fell 42.20 points to 16,872.87, the Nasdaq gained 1.74 points to 4,397.94 while the S&P 500 dipped 3.58 points to 1,961.10.

World markets took a hit Thursday amid rising concerns over Europe's financial stability Portugal's Espirito Santo International, which owns the country's largest bank, reportedly missed a debt payment this week and was cited for accounting irregularities, echoing issues that sparked Europe's debt crisis four years ago.

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On Friday, senior Portuguese officials dismissed the speculation that it is by saying it had a 2.1-billion cash cushion which is enough to cover its exposure to other Espirito Santo group companies and keep it within regulatory requirements.

In corporate news, Wells Fargo reported its second-quarter profit rose three per cent, bolstered by loan growth, higher deposit balances and improved credit quality. Revenue slipped, but still topped analysts' estimates. The largest mortgage lender in the U.S. said net income after taking out dividends on preferred stock was $5.42-billion (U.S.), or $1.01 per share, for the period ended June 30. A year ago it earned $5.27-billion, or 98 cents per share.

In commodities, the price of oil began to fall again on Friday, giving up most of the gains it had made the previous day in the first rally in two weeks.

Oil prices shot up in the last month to a 10-month high of more than $107 (U.S.) a barrel over concerns that strife in Iraq might disrupt supplies. However, they have since been easing back down as al-Qaeda inspired militants' gains in Iraq did not affect oil exporters. Also putting downward pressure on prices is the prospect of a sudden return of Libyan oil to the global market.

On the commodity markets, the August crude contract on the New York Mercantile Exchange down $1.04 to $101.89 a barrel.

August bullion was down $2.60 to $1,336.60 an ounce, while August copper was down a penny to $3.24 a pound.

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