Even the merger of two giants of the brewing industry — one Canadian, one American — wasn’t enough to cheer up investors Thursday. Markets were falling fast on both sides of the border over concerns about corporate earnings and the economic outlook.

At midday, Toronto’s S&P/TSX composite index had dropped 83.03 points or 0.98% to 8371.12, while the TSX Venture Exchange was 4.94 points or 0.33% lower at 1507.05.

Wall Street was hit hard, as blue chips tumbled below 10,000 for the first time in two months, and the Nasdaq fell to a nine-month low. The Dow Jones industrial average was down 75 points or 0.75% at 9970.77 after posting a triple-digit decline Wednesday. Twenty-one of 30 stocks were moving lower. The Nasdaq was off 12.61 points of 0.67% at 1861.76 and the S&P 500 was 7.52 points or 0.69% lower at 1086.36.

The Canadian dollar was up 0.53 of a cent to US76.12¢ after falling by more than half a U.S. cent Wednesday on the prospect of higher interest rates in the U.S.

On Bay Street, the biggest action was in the shares of Molson Inc. Canada’s largest brewer, said Thursday morning it has agreed to merge with Adolph Coors Co. in a US$6-billion deal that creates a new beer behemoth and ends the independence of two of North America’s biggest family-run brewing icons.

Investors seemed to like the deal – Molson shares were up $1.05 or 3.03% to $35.75 with more than 9.9 million shares trading hands — about 8% by volume of the TSX’s total morning activity. This was despite the fact Molson reported disappointing quarterly results. Net profits fell 19.3% to $68.3 million in the three months ended June 30, the first quarter of the company’s 2005 fiscal year. Total Molson beer sales volume fell 3.4%, including 2.8% in Canada and 4.2% in Brazil. Quarterly revenues rose to $675 million from $661.8 million and Molson shares rose 50 cents to $35.20.

But driving the Toronto market were technology stocks – as a group they were off more than 2%, lead by Nortel Networks Corp., which was down 23¢ to $5.51 on the usual heavy volumes. All of the TSX subgroups were down in fact – financials by 0.35%, industrials by 0.22% and gold by 1.13%.

Air Canada was again one of the most active stocks, down 15¢ to 33¢. The stock has been tumbling all week after chief executive Robert Milton said that anyone who holds fewer than 11,894 shares will get nothing when the stock is delisted on the Toronto exchange this fall.

A number of heavyweight companies in Canada and the U.S. produced a mixed bag of earnings for the second quarter, including Abitibi Consolidated Inc., Qualcomm Inc., Sears Canada Inc. and McDonald’s Corp.

Analysts noted that while earnings have been mostly good, investors have become disillusioned by the number of companies lowering their forecasts. With so much uncertainty ahead, some analysts say the third quarter is shaping up to be a long period of sideways trading.

Inverstors are also waiting for the quarterly report from Microsoft Corp., expected after markets close Thursday.

Overseas, London’s FTSE 100 was off 54.9 points at 4,322.4, Frankfurt’s DAX 30 lost 1.6 % and the Paris CAC 40 moved 1.4% lower.

In Asia, Tokyo’s Nikkei Stock Average of 225 issues closed down 148.82, or 1.3%, at 11,285.04 and Hong Kong’s Hang Seng Index lost 74.90, or 0.6%, at 12,320.21.

In economic news, the Bank of Canada released its Monetary Policy Report Update on Thursday, outlining its views on the economy. It said Canada’s economy is on pace to grow by about 2.75% this year – not exactly a boom, but strong enough to require higher interest rates.

In its latest report on economic prospects at home and globally, the central bank said its outlook for growth this year hasn’t changed much from its previous projections last April.