TSX sheds more than 100 points at midday

A man walks past a building in Toronto that used to house the Toronto Stock Exchange on August 18 2011. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - The Toronto stock market was showing a triple-digit loss at midday Thursday as commodity prices tumbled amid reports from three of the world's largest economies showing a slowdown in manufacturing.

The S&P/TSX fell 165.95 points to 11,593.39 while the TSX Venture Exchange was off 19.43 points at 1,235.14.

The Canadian dollar shed 0.33 of a cent to 97.79 cents US.

Wall street markets also fell, with the Dow Jones losing 66.45 points to 12,757.94, the S&P 500 down 11.67 points to 1,344.02 and the Nasdaq losing 28.92 points to 2,901.53.

Appetite for stocks was dented by the results of a monthly HSBC survey which showed that manufacturing in China, the world's No. 2 economy, has continued to contract. China's growth has been a pillar of the global economy in recent years, so its slowdown has been of particular concern to investors.

In the 17-country eurozone, the equivalent manufacturing survey, called the purchasing managers' index, fell to 44.8 points in June from 45.1 the previous month. A number below 50 indicates contraction. A related survey on the services sector also showed declining activity, suggesting a drop in GDP in the second quarter.

Meanwhile, in the U.S., the Philadelphia branch of the Federal Reserve reported that manufacturing slumped this month, pulled down by drops in new orders and shipments. Economists had expected no change in the manufacturing index.

August gold prices dropped sharply, by $37.90 to US$1,577.90 an ounce, while July copper prices lost seven cents to US$3.32 a pound.

Oil prices hovered around eight-month lows, losing $1.98 to US$79.47 a barrel. The energy sector was the biggest loser on the TSX, down 2.9 per cent.

Economic news from Canada included a report from Statistics Canada that retail sales dropped 0.5 per cent in April, much weaker than the 0.2 per cent gain economists had expected.

The federal agency also reported that the number of people receiving regular EI benefits dropped for the third consecutive month in April, down 28,600 to 513,700.

But most eyes were focused on federal Finance Minister Jim Flaherty's announcement that mortgage rules would be tightened for the fourth time in as many years, lowering the amortization rate to 25 years from 30 years and dropping the level people can borrow against their house to 80 per cent from 85 per cent.

"The move probably reflects the realization that interest rates will remain unchanged for longer than previously expected and is designed to prevent a resurgence in activity akin to the one we saw in mid-2011," said CIBC World Markets economist Benjamin Tal.

While banks welcomed the news, analysts said it could hurt their balance sheets in the short-term. The financial sector fell 0.5 per cent with shares in CIBC (TSX:CM) down 31 cents to $72.51.

In corporate news, Encana Corp. (TSX:ECA) will invest an additional $600 million this year — on top of it's original $2.9-billion budget — to significantly increase production of valuable liquids-rich natural gas amid a prolonged downturn in the price of so-called dry gas. Stock in the company fell 7.5 per cent or $1.66 to $20.47.

Alimentation Couche-Tard (TSX:ATD.B) says it is looking at expanding Statoil Fuel & Retail's reach to new markets in Europe after its purchase of the Norwegian company elicited interest from other oil brands. Couche-Tard shares were down 29 cents at $44.96.

And Chorus Aviation Inc. (TSX:CHR.B) says it is working with the Uruguayan government on the recapitalization of Pluna, days after the Canadian company said it won't invest more money to bail out the airline from its financial difficulties. Shares were unchanged at $3.30.

In the U.S., the number of people seeking unemployment benefits dipped last week but not by enough to indicate hiring will pick up. Weekly applications for unemployment aid declined by 2,000 to a seasonally adjusted 387,000, the Labour Department said. That's down from an upwardly revised 389,000.

And a measure of future U.S. economic activity rose in May, a sign the economy is likely to keep growing, though at a tepid pace. The Conference Board says that its index of leading economic indicators rose 0.3 per cent last month, after a 0.1 per cent drop in April. April's drop was the first in seven months.

Europe's finance ministers will meet later Thursday to try to find common ground on whether to soften Greece's austerity terms, possibly clear a bank bailout request from Spain and discuss new ways to boost confidence in the eurozone.

The meeting in Luxembourg will try to make progress on wide-ranging solutions to the debt crisis that leaders hope to see adopted by a European Union summit on June 28. The leaders of Germany, France, Italy and Spain will meet in Rome on Friday.