Toronto's main stock index dropped sharply on Friday morning after dismal U.S. jobs data signaled the frail state of the world's largest economy, but rallying gold miners helped break the fall.

Oil and gas shares were among the hardest hit, as risk assets were sold off after figures unexpectedly showed U.S. employment growth ground to a halt in August, fueling fears of a new recession.

Oil futures dropped more than $2 a barrel following the report, sending Suncor Energy (SU.TO: Quote) down 2.8 percent to C$30.10, and Canadian Natural Resources (CNQ.TO: Quote) down 3.2 percent to C$35.10.

Offsetting the decline, gold miners climbed 2.7 percent to the top of the gainers list, tracking higher bullion prices, which neared $1,900 an ounce on safe-haven buying.

Barrick Gold (ABX.TO: Quote) jumped 3.8 percent to C$52.35, Goldcorp (G.TO: Quote) advanced 3.3 percent to C$53.86, and Kinross Gold (K.TO: Quote) added 2.9 percent to C$17.32.

When you have gold up 50 bucks you have to think that gold mining companies are going to be making a lot more money, said Aaron Fennell, futures specialist at ScotiaMcLeod, noting the price of gold has rallied $400 an ounce from $1,500 to more than $1,900 since the beginning of the summer.

Traders were really nervous at $1,900 and we lost $200 in basically 2-1/2 days ... now it's beginning to recover so it makes investors in mining companies feel more confident that $1,900 gold is here to stay.

At 10:36 a.m. (1436 GMT), the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was down 57.03 points, or 0.45 percent, at 12,643.71. It pared earlier losses of more than 1 percent as the materials group - home to gold miners - gained 1.3 percent. The rest of the index's 10 sectors were weaker, including financials, off 0.6 percent.  

Laurentian Bank, however, climbed 1.4 percent to C$44.23, after reporting net income rose 17 percent in its third quarter as loan losses fell, beating analysts' earnings expectations.

In technology issues, Research In Motion (RIM.TO: Quote) dropped 2.8 percent to C$30.17 after big box retailer Best Buy slashed up to $150 off the U.S. price tag for RIM's PlayBook tablet computer for the Labor Day weekend.

WiLan Inc (WIN.TO: Quote) edged 0.1 percent lower to C$7.05 after the technology licensing company said it had begun its patent infringement cases against Apple Inc, Dell, Hewlett-Packard and six other companies.