January 9, 2009 / 4:08 PM / 10 years ago

CANADA STOCKS-TSX drops sharply as oil prices skid

* Toronto’s key index pushed lower after early gain

* Lower oil prices blamed for bulk of market’s skid

* Canadian and U.S. economies shed more jobs in December (Adds details)

By Frank Pingue

TORONTO, Jan 9 (Reuters) - Toronto’s main stock index was down at midmorning on Friday as oil prices dropped on weak U.S. jobs data, undermining the resource-heavy index’s early gains.

The heavyweight energy sector led the market’s decline with a 3 percent fall as the price of oil, a key Canadian export, slipped below $40 a barrel.

“Oil prices are a little weaker and that’s creating some of the negativity here,” said Irwin Michael, portfolio manager at ABC Funds. “Plus people are generally negative. You pick up the newspapers and it tends to be more negative than positive and in consequence people are fearful.”

At 10:40 a.m. (1540 GMT), the S&P/TSX composite index .GSPTSE was down 165.71 points, or 1.8 percent at 9,055.87. Just after the open the index rose 45.93 points to 9,267.51.

Nine of the TSX’s 10 sectors were in negative territory. The information technology group, up 1 percent, was the only sector in positive territory as it bounced back after two straight sessions of sharp losses.

Data released ahead of the market open showed a rise in U.S. unemployment in December, which added to gloom over the outlook for the world’s biggest economy.

The data shook the price of oil since it helped focus the oil market on the deteriorating state of the world economy, which many experts say is already in a recession.

Shares of EnCana Corp (ECA.TO), the biggest drag on the index, were down 4 percent at C$55.80, while Suncor Energy (SU.TO) shares fell 4.8 percent to C$27.44.

Lower gold prices contributed to the 2 percent skid in the materials group, home to gold-mining shares,

Barrick Gold (ABX.TO) shares dropped 2 percent to C$38.43, while Kinross Gold (K.TO), whose shares were downgraded to a “hold” rating from “buy” by Genuity Capital, were off 3 percent at C$20.90.

In Canada, data showed the economy shed more than 34,000 jobs in December while the unemployment rate rose to 6.6 percent. Both figures were worse than forecasts in a Reuters poll for job losses of 22,000 and a jobless rate of 6.5 percent.

$1=$1.19 Canadian Reporting by Frank Pingue; editing by Peter Galloway

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