Stock market losses accelerate into triple digits in afternoon trading

TORONTO – Losses on the Toronto Stock Exchange accelerated into the triple digits Friday afternoon as investors fretted about whether the U.S. and global economies are headed for another recession that could punish corporate earnings and sap consumer confidence.

The S&P/TSX composite index lost 151.8 points to 12,034.9 a day after posting a three per cent decline. The junior TSX Venture Exchange was down 6.49 points at 1,764.14.

In New York, the Dow Jones industrial average shed 119.24 points at 10,871.34. The S&P 500 index lost 11.7 points at 1,128.95 and the Nasdaq composite index was down 24.91 of a point at 2,355.52.

Stock markets have posted wild swings for nearly two weeks after a downgrade of the U.S. government’s credit rating and worsening fears about Eurozone debts problems.

The Toronto stock market took a beating Thursday, losing nearly 400 points, while Wall Street also lost hundreds of points in another day of volatility after relative calm earlier in the week. The selloff was sparked by a spate of bad economic news from the U.S. and around the world that raised fears another recession may be on its way.

Investors have been trading emotionally since the beginning of August and the latest push into panic mode was a woeful manufacturing survey Thursday from the Federal Reserve Bank of Philadelphia, which renewed U.S. recession fears in particular, said Andrew Pyle of Scotia MacLeod.

Investors are trying to sort out whether the survey is a reflection of poor confidence at that time or whether it indicates something more substantial _ a leading indicator of recession _ Pyle said, noting that the survey was taken in the first 10 days of August when there appeared to be a significant chance the U.S. would have to default on its debt.

“What you’re seeing (Friday) is not everyone believes the recession is imminent _ that a lot of this was probably confidence,” he said.

“That’s what you’re seeing play out, that ‘Whoa, maybe we’ve gone too far here’.”

The Canadian dollar was ahead 0.01 of a cent to 101.18 cents US after StatsCan said the pace of inflation eased in July to 2.7 per cent, slower than the 2.9 per cent economists had expected. It was the first time that inflation was below a pace of three per cent since February.

Gold prices added $32.30 to US$1,854.40 per ounce in mid-afternoon trading. The global gold index was the biggest gainers on the TSX, up two per cent.

Copper prices was unchanged at US$3.97 per pound. The mining sector on the TSX slipped three per cent.

Crude prices lost 39 cents to US$81.99. The energy sector on the TSX fell 1.8 per cent.

Canadian financial companies led the TSX lower, with the sector down 3.2 per cent ahead of the start of earnings season next week.

Canadian Finance Minister Jim Flaherty told a Parliamentary committee Friday that the current global economic turmoil will impact the Canadian economy, but so far his budget projections remain on track.

“While Canada experienced greater than expected growth in the first quarter, that is expected to be balanced out by a softer than anticipated second quarter,” the minister said.

Flaherty was called to testify before the committee after two weeks of frenzied trading on stock markets. The committee also heard from Bank of Canada governor Mark Carney, who said the U.S. is facing its weakest recovery since the Depression.

“Recent events serve as a reminder that, in a world awash with debt, repairing the balance sheets of banks, households and countries will take years,” Carney said.

“As a consequence, the pace, pattern and variability of global economic growth is changing and Canada must adapt. In short, the considerable external headwinds that the bank has long identified are now blowing harder.”

On Thursday, economists with Morgan Stanley said that the U.S. and Europe are “dangerously close to recession,” adding, “it won’t take much in the form of additional shocks to tip the balance.” JPMorgan Chase & Co. followed suit on Friday, slashing its fourth-quarter growth forecast to one per cent from 2.5 per cent.

Overseas stock markets had larger drops than in North America. European banking stocks fell near two-and-a-half-year lows, dragged down by rumours about banks’ potential losses on bonds issued by heavily-indebted governments.

Eurozone debt issues also continue to drag markets, with European banking shares hitting a near 2- 1/2-year low on renewed worries of the health of the continent’s banks Friday.

“This week has seen a continuation of the trend of weaker than expected data and political reaction to the European problems which pretty much amounts to ‘Let’s have a get-together a couple of times a year,’ ” said Gary Jenkins, an analyst at Evolution Securities.

On Friday, the European Central Bank’s chief economist Juergen Stark argued against the introduction of so-called eurobonds, which he says would reduce incentives for troubled countries to tackle budget problems. Some, including the opposition in Stark’s native Germany, view at least the limited introduction of eurobonds as the logical solution to the eurozone debt crisis.

In Canadian corporate news, Caledonia Mining Corporation (TSX:CAL) says it faces a dispute with the Zimbabwean government over the Toronto company’s Blanket gold mine in southern Africa. Shares 1.5 cents to 7.5 cents each.

Labrador Iron Mines Holdings Ltd. (TSX:LIM) reported Friday a loss of $4.7 million, widened from a loss of $900,000 in the same period a year earlier on startup costs. Shares were down 65 cents to $8.

Afexa Life Sciences Inc. (TSX:FXA) said its loss for the three months ended June 30 was  $3.1 million or three cents per share, down from $4.1 million or four cents in the same prior-year period as revenue soared to $4.6 million from $1.8 million. Shares were down one cent at 56 cents.

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