Toronto's main stock index backed away from its highest level in nearly three weeks on Friday as concerns about weakness in the global economy hurt commodity prices, countering unexpectedly strong North American jobs data. US crude oil futures settled down nearly $2 a barrel as signs this week of slowing in the manufacturing and services sectors in Europe and China continued to weigh on investor sentiment.
Energy stocks followed suit, falling 0.8 percent. The biggest laggards included Suncor Energy, down 0.5 percent to C$33.00, Canadian Natural Resources, down 1.6 percent to C$30.22 and Encana Corp, off 2.6 percent to C$21.27. "Concerns remain about the outlook for global growth, particularly demand out of high-consumption emerging markets like China, so we've gotten a little bit of weakness there," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis.
"Added to that is a strengthening US dollar and all that's coming together to push oil prices lower. Given the sensitivity to resource prices in the TSX we're seeing a little bit of weakness there," he added. Gold miners were also down sharply, off 1 percent, as bullion retreated from an 11-month high.
Yamana Gold dropped 3.1 percent to C$18.60, Barrick Gold fell 0.6 percent to C$41.13 and Kinross Gold lost 2.7 percent to C$10.59. The Toronto Stock Exchange's S&P/TSX composite index ended down 28.69 points, or 0.23 percent, to 12,418.99. Six of the 10 sectors were negative. Financials edged up 0.1 percent. Earlier, the index its strongest intraday level since September 17.
The TSX ended the week 0.8 percent stronger, helped by encouraging US data and optimism that Spain will eventually request a bailout, seen by some as the necessary next step to alleviating the euro zone's debt crisis. The index's slant towards globally economic sensitive commodity companies - which make up about half of the index - has caused the TSX to dramatically lag Wall Street in 2012. The TSX is up about 4 percent year to date, versus a 16 percent rise for the S&P 500, near its best level in five years.
Better-than-expected employment data from Canada and the United States helped stem the losses on Friday. In Canada, the economy added 52,100 jobs in September, more than five times the consensus figure analysts had expected, and bolstering the Bank of Canada's case for an eventual interest rate rise.
Meanwhile, the US unemployment rate unexpectedly dropped to 7.8 percent in September, reaching its lowest level since President Barack Obama took office and providing a boost to his re-election bid. On Monday, Canadian markets will be closed for Thanksgiving, while US government offices and some financial markets will close for the Columbus Day holiday, prompting some investors to stay on the sidelines. "Quite often on the Friday before a long weekend there's some selling coming into the market because people don't want to carry positions for three days," said John Kinsey, portfolio manager at Caldwell Securities.
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