October 10, 2008 / 7:17 PM / 10 years ago

UPDATE 3-Toronto stock index sinks below 9,000 level

* Energy stocks tumble as oil falls below $78

* Strong September jobs numbers fail to lift buoy market

* Ottawa’s C$25 bln mortgage plan shrugged off (Adds analyst comments, details, updates figures)

TORONTO, Oct 10 (Reuters) - The Toronto Stock Exchange’s main index plunged on Friday afternoon, slipping below 9,000 for the first time in more than three years, as commodity issues fell along with underlying prices on deepening fears the world economy will go into recession.

An announcement that Canada will buy up to C$25 billion in mortgage-backed securities to try to cushion banks from the global financial crisis [ID:nN10361962] and a surprise jump in September jobs data did not help lift the market mood.[ID:nN10365080]

Leading the way down was the heavily weighted oil and gas sector, which sank 11.9 percent as oil tumbled 10 percent to below $78 a barrel on persistent fears that demand would falter amid a global recession. [ID:nT134769].

“Nobody, at the moment, is believing that any of the measure that are being taken are enough, soon enough,” said Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management Ltd in Calgary.

“The market clearly has absolutely no confidence in the (financial) system. It’s very hard to sit here and say what will change the collective psychology of an entire financial market that believes it’s just going to get worse.”

In these rocky economic times, Toronto is taking its 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,” he said.

At 2:30 p.m. (1830 GMT), the S&P/TSX composite index .GSPTSE was down 698.63 points, or 7.28 percent, at 8,901.55.10, with all 10 of its main groups lower.

It is the first time the index has fallen below the 9,000 level since January 2005.

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

In choppy activity, the financial services sector slumped 3.1 percent on Friday with Royal Bank of Canada (RY.TO), down 1.1 percent at C$40.95.

The federal government said on Friday it would buy up to C$25 billion ($21 billion) in insured residential mortgages to help cushion banks from the global financial crisis and address a “scarcity” of private-sector lending [ID:nN10361962].

Financial institutions welcomed the government plan, saying it was a safe way to aid credit markets.

The resource-laden materials group sank 11.4 percent as metals prices tumbled on mounting fears of a recession [ID:nLA225100].

Barrick Gold(ABX.TO) fell 10.8 percent to C$36.03, while Inmet Mining IMN.TO tumbled 19.5 percent to C$28.75.

In the oil patch, Canadian Natural Resources (CNQ.TO) slid 11.5 percent to C$47.76, while EnCana Corp (ECA.TO) fell 15 percent to C$42.43.

In economic news, 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. ($1=$1.20 Canadian) (Reporting by Jennifer Kwan; editing by Rob Wilson)

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