The S&P/TSX composite index fell 152.01 points to 11,361.2. Losses would have been much more severe had it not been for jump of almost seven per cent in the gold sector. As it is, the TSX fell 1.86 per cent this week, leaving the main index five per cent below where it started the year. The TSX Venture Exchange added 1.86 of a point to 1,291.59.
The U.S. Labour Department said the American economy only managed to create 69,000 jobs last month, far below the modest expectation for 158,000 jobs. The jobless rate edged up 0.1 of a point to 8.2 per cent.
The dismal employment data again reminded investors that the recovery from the 2008 financial collapse and subsequent recession remains slow.
"The job growth is disappointing but it is growth nonetheless so it is all consistent with that," said Robert Gorman, chief portfolio strategist at TD Waterhouse, who observed that recessions associated with credit crises are longer and deeper than average.
"But it is frustratingly slow — and that’s perhaps the operative phrase here — it’s a frustratingly slow grind as we gradually get out of the credit crisis."
The TSX and the dollar also failed to find lift from another report showing Canadian economic growth met expectations for the first quarter, rising at an annualized rate of 1.9 per cent.
But the report showed Canadian economic growth faltered at the end of the quarter, with March growth coming in at 0.1 per cent, lower than the 0.3 per cent reading economists expected.
The loonie closed down 0.6 of a cent to a five-and-a-half-month low of 96.21 cents US as traders sold off riskier assets such as resource-based currencies, commodities and equities and sought safety in U.S. Treasuries. The 10-year U.S. Treasury yield dropped below 1.5 per cent for the first time ever, falling to 1.46 per cent late in the afternoon.
U.S. markets retreated as the Dow Jones industrial average plunged 274.88 points to 12,118.57, leaving the blue chip index under water for the year.
The Nasdaq composite index was down 79.86 points to 2,747.48 and the S&P 500 index slid 32.29 points to 1,278.04.
Markets were already poised for a rough ride Friday after China’s state-affiliated Federation of Logistics and Purchasing had earlier reported that its purchasing managers index, or PMI, fell 2.9 percentage points to 50.4 per cent in May, just above the 50 level that signifies expansion. The index was at 53.3 in April.
And HSBC’s index, which is adjusted for seasonal conditions and is more weighted toward export manufacturers, fell to 48.4 in May from 49.3 in April.
The European debt crisis is pinching China’s export manufacturers, while moves to control property prices have chilled spending on construction. Some analysts said the surveys suggest China’s economic growth will fall below eight per cent in the second quarter.
This was a double shot of bad news as China has been an important element in helping the global economy recover from the recession that followed the 2009 financial collapse.
The energy sector led losses, down 3.26 per cent as crude prices fell below the US$84 a barrel level after worries about a slowing global economy, the eurozone crisis and a higher U.S. dollar combined to drive oil down 17 per cent last month.
The July contract on the New York Mercantile Exchange fell $3.30 to US$83.23 a barrel. Suncor Energy (TSX:SU) fell 56 cents to US$27.47 and Canadian Natural Resources (TSX:CNQ) gave back $1.10 to $28.56.
The financials sector was also a major weight, down 2.84 per cent with TD Bank (TSX:TD) $2.19 lower to $76.88 while CIBC (TSX:CM) lost $1.62 to $70.45.
The base metals sector also gave back gains, down 1.45 per cent as the July copper contract on the Nymex fell five cents to US$3.31 a pound after dropping 12.43 per cent in May. Copper is widely viewed as a key economic barometer as it is used in so many industries and China has been the biggest purchaser of the metal. Lundin Mining (TSX:LUN) lost six cents to $4 while First Quantum Minerals (TSX:FM) shed 34 cents to $17.75.
The gold sector ran ahead as bullion prices turned positive after the jobs data with the August contract up $57.90 to US$1,622.10 an ounce. Goldcorp Inc. (TSX:G) jumped $3.23 to $40.93 while Barrick Gold Corp. (TSX:ABX) improved by $3.06 to $43.65.
Weak data from Europe was one more reason for traders to keep to the sidelines Friday. A survey on Europe’s manufacturing sector was decidedly downbeat, falling to 45.1 points, with the measure for Germany, which had grown steadily throughout the debt crisis of the past two years, hitting a 35-month low of 45.2.
Analysts said the figures suggested the region would experience an even deeper economic downturn than previously forecast.
The gloomy data further darkened the mood among investors, who have been increasingly spooked by the possibility that the 17-country eurozone might break up.
The head of the European Central Bank drove home those concerns on Thursday when he told EU leaders that the currency union is unsustainable in its current form.
The euro fell almost seven per cent in May and hit a new two-year low of US$1.2322 before rising to $1.2426.
The likelihood of Greece leaving the euro grew in early May when parties opposed to the terms of the country’s financial rescue won at the polls. New elections are planned for next month.
This week, Spain became the new focus of the crisis after its borrowing rates soared to nearly seven per cent, a level that is considered unsustainable as worries grew about the stability of the country's banks.