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At midday: Markets sink after Ukraine claims to attack Russian forces

An armed pro-Russian separatist looks as flames erupt from a gas pipeline after shelling in Donetsk on Aug. 15, 2014.

SERGEI KARPUKHIN/REUTERS

The Toronto stock market moved into the red late morning Friday on reports of a worsening situation in the Ukraine-Russia standoff.

Bloomberg quoted Ukrainian officials as saying its military destroyed part of a column of armed vehicles that has crossed the border from Russia.

The S&P/TSX composite index fell 81.52 points to 15,209.66, as traders also digested Canadian jobs data that blew past expectations.

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The Canadian dollar lost early gains and was down 0.1 of a cent to 91.62 cents (U.S.) as traders sought safety and bought into the U.S. dollar. The yield on the benchmark 10-year U.S. Treasury fell to 2.338 per cent, down from 2.375 per cent earlier in the morning.

Statistics Canada reported that the economy added 42,000 positions last month. Economists had generally expected that about 20,000 jobs were created during July.

The federal agency had said earlier this week that it had discovered an error in its jobs data originally released last Friday, showing the economy added a meagre 200 jobs.

U.S. indexes gave up early gains with the Dow Jones industrials down 65.17 points to 16,648.41, the Nasdaq lost 2.03 points to 4,450.97, and the S&P 500 index slipped 4.62 points to 1,950.66.

Meanwhile, it wasn't clear if that armed convoy was part of another convoy of almost 300 vehicles containing humanitarian aid that that the Russian government dispatched to eastern Ukraine earlier this week. The area has been the scene of heavy fighting as Ukrainian forces fight to retain control of territory from pro-Russian militias.

Russia had earlier agreed to let Ukrainian officials inspect the aid convoy on Friday and agreed to let the Red Cross distribute the aid around the rebel-held city of Luhansk.

Markets had been further reassured after Russia's President Vladimir Putin appeared to tone down his rhetoric on Ukraine, where pro-Russian rebels are waging an insurgency in Ukraine's east. He said Russia's goal was "to stop bloodshed in Ukraine as soon as possible."

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Most TSX sectors were negative but the gold sector was well off early lows, down 0.5 per cent while December bullion halved earlier losses. However, gold was still down $9.30 to $1,306.40 (U.S.) an ounce.

The energy sector fell 0.4 per cent with September crude in New York ahead 99 cents to $96.57 a barrel.

The metals and mining group gained 0.1 per cent, while September copper was unchanged at $3.09 a pound.

On the corporate front, the world's biggest soda maker is hoping to benefit from the surging popularity of energy drinks. Coca-Cola is buying a 16.7 per cent stake in Monster Beverage for $2.15-billion (U.S.). Monster shares surged 30 per cent to $93.21 while Coca Cola gained 1.7 per cent to $40.87.

Auto parts maker Martinrea International Inc. posted $23.3-million (Canadian) of net income in the second quarter, a 15 per cent decline from a year earlier but an improvement from the previous quarter. The profit for the three months ended June 30 amounted to 27 cents per diluted share under standard accounting and 28 cents per share on an adjusted basis, below estimates on both counts. Its shares declined 42 cents to $13.38.

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