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(Adds details, updates to late morning)
*TSX index lower in choppy session after big early selloff
*Resource shares fall amid worries over demand
*Jitters over global economic outlook persist
By Leah Schnurr
TORONTO, July 3 (Reuters) - The Toronto Stock Exchange's main index was lower at late morning on Thursday, but well off early lows, as economic concerns nagged and resource shares fell amid worries over demand.
The index fell by more than 1 percent in early dealings, following a 3 percent decline on Wednesday, moving into 13,000 territory for the first time since the beginning of May.
Worries of rising inflation and slower growth set the tone after the European Central Bank cited inflation risks and decided to raise interest rates by a quarter point. But nerves were soothed after the bank cast doubt on further aggressive hikes.
Michael Sprung, president at Sprung & Co. Investment Counsel, said that the comments raised hopes that the U.S. Federal Reserve might not have to raise interest rates to bolster the greenback.
However, Sprung said economic worries were still in the forefront, adding; "Our view is that inflation has become the big concern here and that it's not going to go away any time soon."
The S&P/TSX composite index .GSPTSE was down 61.65 points, or 0.44 percent, at 13,972.46 with seven of its 10 main sectors falling. The index hit a low of 13,796.48 earlier.
Also on the economic front, data out of the United States showed an unexpected contraction in the services sector in June, but a payrolls report added some brightness after it came in close to Wall Street's expectations.
The market was also concerned about the impact of the rising price of oil on consumers and businesses. Climbing oil had been a key factor in the index's recent ascent to record high levels as it has boosted energy stocks.
"It's kind of gone so far that it's weighing down the rest of the market," said Keith Summers, chief investment officer at Stonegate Private Counsel, said of high oil prices.
Resource issues led the downside as miners and fertilizer companies fell amid concerns over the impact of red-hot commodity prices on demand. Agrium (AGU.TO) was down C$5.88, or 5.6 percent, at C$99.22, while Fording Canadian Coal Trust FDG_u.TO gave up C$2.06, or 2.5 percent, at C$79.64. Overall, the materials group slid 1.6 percent.
On the upside, the financial sector rose 0.8 percent. National Bank of Canada (NA.TO) was up 69 Canadian cents, or 1.4 percent, at C$49.50, and Royal Bank of Canada (RY.TO) gained 79 Canadian cents Canadian cents, or 1.8 percent, to C$44.79.
Summers said that despite the overall negative tone to the market, he doesn't expect it to retest the lows seen in January when the index plummeted more than 11 percent over the course of five days.
"I think until the rest of the global market gets settled down, and oil gets under control, we're going to see a lot more bearish sentiment," Summers said. ($1=$1.02 Canadian) (Reporting by Leah Schnurr; Editing by Peter Galloway)