October 10, 2008 / 4:17 PM / in 9 years

UPDATE 2-Toronto stocks sink on oil's drop, shrug off data

*Energy shares drop as oil falls to $80 on recession fears

*Strong September jobs numbers fail to lift key index

*Ottawa’s C$25 bln mortgage plan shrugged off

(Adds analyst’s comments, details, updates figures)

TORONTO, Oct 10 (Reuters) - The Toronto Stock Exchange’s main index plunged on Friday morning as oil slid to $80 a barrel, pulling down energy shares, on fears demand will shrink if the world economy goes into recession.

An announcement that Canada will buy up to C$25 billion in Canadian mortgage-backed securities to try to cushion banks from the global financial crisis [ID:N10361962] and a surprise jump in September jobs data did not help cheer the market. [ID:nN10365080]

Leading the way down was the heavily-weighted oil and gas sector, which sank 8.5 percent as oil tumbled more than 7 percent to around $80 a barrel on persistent worries that demand for the commodity would falter on fears of a global recession. [ID:nT134769].

“We’re still taking our direction from European and U.S. markets, which are still spooked,” said Paul Taylor, chief investment officer at BMO Harris Investment Management Inc.

“All eyes are focused on the global economic environment and the potential for a global economic recession and global financial services instability.”

Shortly after 11:45 a.m. (1545 GMT), the S&P/TSX composite index .GSPTSE was down 402.43 points, or 4.19 percent, at 9.197.75, with all of its 10 main groups lower.

Since the start of the third quarter, the benchmark index has shed C$438.9 billion in value, according to the TMX Group (X.TO), which owns the exchange.

In choppy activity, the financial services sector slumped 1.8 percent on Friday with Royal Bank of Canada (RY.TO), down 1.4 percent at C$40.81.

The resource-laden materials group sank 6.5 percent as metals prices tumbled on mounting fears of a looming recession. [ID:nLA225100]

Barrick Gold(ABX.TO) fell 6 percent to C$37.96, while Inmet MiningIMN.TO fell 12 percent to C$31.43.

In the oil patch, Canadian Natural Resources (CNQ.TO) slid 9.9 percent to C$47.61, while EnCana Corp (ECA.TO) fell 10.6 percent to C$44.60.

Canada gained 107,000 jobs in September, according to Statistics Canada data on Friday. Most of the increase was in part-time employment but even the rise in full-time jobs exceeded the increase in total employment foreseen in a Reuters survey of analysts.

The jobs figures were strong but are “one isolated data point in a sea of still generally alarming news,” Taylor said.

Prime Minister Stephen Harper said the government’s multibillion-dollar mortgage plan would help buffer Canadian lenders from a global financial crisis that he said was unfolding beyond Canada’s control.

He said the program was not a bank bailout. [ID:nN10361962] ($1=$1.19 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)

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