The panic that has gripped markets intensified Friday, sending stocks down sharply lower and the U.S. dollar higher. Trading on futures contracts on the S&P 500 was briefly halted Friday morning as the stock market rout intensified. After falling 5%, the circuit breaker was triggered and trading was halted until the 9:30 a.m. EDT open.

At the open, the Dow Jones plummeted more than 8%, falling below the 8,000 mark for the first time since April 2003. Canada's TSX Composite index fell more than 500 points to a session low of 9034. Meanwhile, the volatility index (VIX) reached a reading of 70 for the first time ever. Markets then staged a rebound into positive territory after Italian Premier Silvio Berlusconi said the idea of suspending world markets was being discussed before selling off again by midday.

Crude oil sold off, with prices falling more than $6 to below $80 per barrel.

"This is a global financial pandemic. Just like viral pandemics, it is pervasive and prolonged and there has been little advance planning to deal with it," noted BMO chief economist Sherry Cooper. "There are no firewalls that can prevent it from spreading, as we have seen, but the question is how to deal with it once it has spread."

In data releases, the Canadian economy roared into September, creating 106,900 new jobs including 19,700 in the manufacturing sector, Statistics Canada reported. The jump in jobs was more than 10 times the consensus estimate of analysts, who had projected an increase of 10,000 after August's jump of 15,200, and marked the biggest monthly net job gain in 30 years. The unemployment rate held steady at 6.1% as nearly 114,000 people entered the labour force during September.

"This survey was conducted in the middle of September, just as the financial turmoil began to gather serious momentum - so even this relatively timely report may be largely viewed as 'old news'," said Douglas Porter, deputy chief economist from BMO Capital Markets. "Still, this report drums home the point that the Canadian domestic economy carried much firmer momentum heading into the storm than many other nations."

Also in Canada, the merchandise trade surplus widened to $5.8 billion in August as the dollar value of imports fell more sharply than exports, Statistics Canada reported. Imports plunged 5.8% from the month before to $37.3 billion in August, the largest monthly percentage drop since December 1991. Exports fell for the first time in eight months, slipping 1.6% to $43.1 billion, mainly due to falling volumes.

The pace of increase in Canadian new home prices continued to slow in August, according to figures released Friday by Statistics Canada. The new housing price index was up 2.3% year-over-year, compared with July's +2.7%. The rate of increase has been trending steadily downward since September 2006, when it stood at 11.9% year-over-year. The national index was unchanged from July. Analysts had expected to see a 0.1% increase in the month-over-month index.

In the U.S., the U.S. monthly trade deficit narrowed in line with expectations in August, shrinking 3.5% to $59.1 billion, just ahead of the consensus expectation of $59.0 billion, and following an upwardly revised $61.3 billion in July, the U.S. Census Bureau reported. July's reading was initially reported at $62.2 billion. Total August exports were $164.715 billion, while imports were $223.853 billion, resulting in a goods and services deficit of $59.138 billion.

U.S. import prices declined 3.00% month-over-month in September, the largest one-month decline since April 2003, while posting a 14.5% annual gain, according to data released from the U.S. Bureau of Labor Statistics. The report also showed a 0.9% month-over-month drop in import prices excluding petroleum products. The decrease in the import prices was led by a 9.00% drop in petroleum prices, the largest monthly decline since October 2006.

International Monetary Fund Managing Director Dominique Strauss-Kahn said on Friday that the European Central Bank took appropriate action this week by cutting interest rates 50bps to 3.75%. Speaking in Washington, D.C. prior to the IMF meeting, Strauss-Khan noted that he has not seen signs of a currency crisis, adding that the euro offers stability to its member nations. He said markets are facing a crisis of confidence and that there is need to act quickly, adding that the U.S. fiscal stimulus package was "justified".

European Central Bank Governing Council member Lorenzo Bini Smaghi said in a speech today that the euro zone might need unified regulation and supervision. "Either a strong response is provided to the challenges posed by the current turmoil to the single financial market within the existing institutional framework, or the framework itself will be changed in favour of a more centralized system of supervision and crisis resolution," he said.

In overnight news, Asia-Pacific stock indexes broke record lows with the Nikkei posting the largest weekly loss on record, and the Australian equity measures having one of the worst single-day declines since the 1987 stock market crash. Overall, the Nikkei lost 24% on the week, and just 11% on the last trading day of the week, while the ASX 200 fell 8.3% on the day and 16% on the week.

European stock indexes also closed down significantly, with the German DAX down 342 points to 4544, the Eurostoxx down 197 points to 2094 and the FTSE 100 down 366 points to 3947.

The Spanish government is planning to purchase €30 billion in banking assets in the fourth quarter of 2008 after it approved a €50 billion bank fund package to support the financial sector. The securities acquired by the government will all be AAA grade securities and purchased at auction. The government also approved a proposal to increase the deposit insurance limit in Spain to €100k from €20K previously.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it and Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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