TSX suffers biggest drop of 2012 on growth fears

By Allison Martell

TORONTO (Reuters) - Canada's main stock index fell nearly 3 percent on Thursday, its largest one-day drop this year, as weak economic data from the United States, China and Europe fanned global growth fears and drove down commodity prices.

Oil, gold and copper prices all fell after a raft of disappointing data, including news that U.S. manufacturing grew at its slowest pace in 11 months in June and hiring slowed as export demand waned. Chinese and European factory activity also slowed.

"Global data has been very weak, and markets have been unable to sustain the recent rally," said Fergal Smith, managing market strategist at Action Economics in Toronto. The TSX rallied to a five-week high on Tuesday, but has since lost ground.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed down 351.02 points, or 2.99 percent, at 11,408.32. It was the biggest one-day percentage drop since October 3.

Every major sector in the TSX was lower. The heavyweight energy group, down 5.4 percent, and materials, down 4.2 percent, had the biggest impact. The materials sector includes gold and base metal miners.

"We're seeing a bit more evidence that the global economy, while it's still going to continue to grow, will probably do so in a much slower fashion," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"That has investors concerned. That's putting pressure on energy and commodity prices and thus weighing on the TSX."

SUNCOR, ROYAL BANK STRUGGLE