October 10, 2008 / 2:43 PM / 10 years ago

UPDATE 1-Toronto stock index sinks as oil drops

*Energy shares drop as oil falls to $82 on recession fears

*Huge Sept. job creation shrugged off

*Ottawa’s C$25 bln mortgage plan also dismissed

(Adds details)

TORONTO, Oct 10 (Reuters) - The Toronto Stock Exchange’s main index dropped on Friday morning as oil slid to $82 a barrel on fears demand will shrink if the world economy goes into recession, pulling down energy shares.

An announcement that Canada will buy up to C$25 billion in insurance mortgages to free up the “scarcity” of private sector lending [ID:nN10361962] 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 3.6 percent as oil tumbled more than 5 percent to around $82 a barrel on persistent worries that demand for the commodity would falter on fears of a global recession. [ID:nT134769].

Shortly before 10:30 a.m., the S&P/TSX composite index .GSPTSE was down 118.69 points, or 1.24 percent, at 9,481.49, with seven of its 10 main groups lower. Earlier, the benchmark index plummeted more than 5 percent.

The financial services sector rose 0.2 percent with Royal Bank of Canada (RY.TO), up 3 percent to C$42.70.

The resource-laden materials group sank 1.5 percent as base metals prices tumbled on mounting fears of a looming recession. [ID:nLA225100]

Barrick Gold (ABX.TO) fell 2.3 percent C$39.47, while Inmet Mining IMN.TO fell 8 percent to C$32.81.

In the oil patch, Canadian Natural Resources (CNQ.TO) slid 4.8 percent to C$50.26, while EnCana Corp (ECA.TO) fell 3.8 percent to C$48.00.

In economic news, Canadian employment unexpectedly soared by 107,000 jobs in September, according to Statistics Canada data. 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. ($1=$1.18 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)

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