* TSX drops 118.07 points, or 0.98 pct, to 11,911.89
* Nine of 10 main sectors lower
* Investors retreat from equities and commodities (Updates to close with comments and share prices)
By Ashleigh Patterson
TORONTO, Oct 13 (Reuters) - Toronto's main stock index closed nearly 1 percent lower on Thursday as cooling demand in China and weak U.S. earnings spurred a retreat after two days of strong gains.
Financial shares in particular took a beating as investors shunned risk assets after disappointing earnings from U.S. No. 2 bank JPMorgan Chase & Co (JPM.N).
The bank's quarterly profit dropped 25 percent, underscoring how global market turmoil and euro zone debt worries have hit investment bank revenues. The earnings sent the Dow Jones industrial average and the S&P 500 index lower after three days of strong gains.[ID:nN1E7951DK]
In Toronto, Bank of Nova Scotia (BNS.TO) was off 1.92 percent at C$52.18. Royal Bank of Canada (RY.TO) slid 2.07 percent to C$47.82, while Manulife Financial (MFC.TO) sank 3.04 percent to C$12.46.
"We seemed to be off somewhat because of the negative reaction to JP Morgan bank earnings south of the border," said Gavin Graham, president of Graham Investment Strategy, adding the lack of confidence prompted risk aversion in Canadian financials.
"If we're seeing those bad numbers in U.S. banks, even though Canadian banks are in a healthier position, we still saw most of our banks off 1.5 percent."
The Toronto Stock Exchange's S&P/TSX composite index closed down 118.07 points, or 0.98 percent, at 11,911.89 .GSPTSE. Nine of the index's 10 main sectors were down. The information technology sector had a slight gain.
The retreat came after the TSX hit a three-week high on Wednesday, rising 1.3 percent after putting in a strong performance on Tuesday.
Concerns over global economic momentum persisted as data on Thursday showed China's trade surplus narrowed for a second straight month in September, reflecting a cooling economy, with both export and import growth rates easing. [ID:nL3E7LD191]
Worries about a slowdown in the Asian powerhouse sparked a global retreat from equities, oil and other commodities. China is the world's second largest consumer of oil. [O/R]
Suncor Energy (SU.TO) fell to C$29.14, down 1.59 percent while Cenovus Energy (CVE.TO) fell 1.58 percent to C$34.26.
The TSX's materials sector also suffered as risk aversion drained copper market sentiment and sent bullion prices lower. China is the world's largest copper consumer.[MET/L]
Barrick Gold (ABX.TO) slid 2 percent to C$48, while Goldcorp (G.TO) shares dropped 1.54 percent to C$47.90.
($1=$1.02 Canadian) (Reporting by Ashleigh Patterson; editing by Peter Galloway)