Source: The Canadian Press

The Toronto stock market rallied late in the session Monday along with the price of gold, but remained in the red as a major deal in the financial sector failed to lift it into positive territory.

The S&P/TSX composite index shed 27.32 points to close at 12,929.01, rebounding from a 70-point loss earlier in the session. The TSX Venture Exchange rose 18.18 points to 2,014.05.

The Canadian dollar rose 0.05 of a cent to 98.28 cents US.

Financial stocks were down 0.8% after Scotiabank (TSX:BNS) said it is paying $2.3 billion to buy up the shares it doesn’t already own in investment firm DundeeWealth (TSX:DW). The acquisition will add a major wealth-management business to the Toronto-based bank’s stable of financial services operations.

Scotiabank fell 45 cents to $54.20, while DundeeWealth gained 6%, or $1.28, to close at $20.75.

A 3% drop in shares of market heavyweight Manulife Financial Corp. (TSX:MFC) also dragged on financials after Citigroup downgraded the insurance giant’s rating to “sell” due to a weak outlook for its U.S. operations and the risk of dilution in any further issuing of equity to raise money to pay down debt.

Manulife shares fell 47 cents to $14.88.

The December gold contract on the New York Mercantile Exchange gained $5.50 to US$1,357.80 an ounce. Barrick Gold Corp. (TSX:ABX) gained 37 cents to close at C$51.08.

However, growing uncertainty over the state of European finances and more monetary tightening in China drove oil and base metals prices lower.

Oil prices fell 24 cents to US$81.74 a barrel and are down about 5% from a week ago in the wake of Ireland’s debt crisis and China’s efforts to slow economic growth.

The energy sector was off 0.81%, with shares in Canadian Natural Resources (TSX:CNQ) down 52 cents at C$39.97.

The metals and mining sector fell 0.6% as prices moved slightly lower after an announcement Friday that China would tighten monetary policy, sparking fears that its economic growth could slow and thereby reduce demand for commodities.

The December copper contract on the Nymex fell eight cents to US$3.75 pound. Shares in Equinox Minerals Ltd. (TSX:EQN) shed 21 cents to C$5.68.

Meanwhile, shares of junior potash miner Potash One (TSX:KCL) jumped 25% after announcing it has agreed to be taken over by Germany’s K+S Aktiengesellschaft in a friendly deal that values the company at $434 million.

BHP Billiton launched a hostile, US$38.6-billion takeover bid earlier this year for Potash Corp. of Saskatchewan (TSX:POT), the world’s largest potash producer, but the proposed deal was turned down by the federal government which ruled it would not be of net benefit to Canada.

It was unclear whether the Potash One deal would face the same scrutiny from Industry Canada, but the much smaller company’s support of the offer will likely help smooth acceptance.

Potash One shares gained 91 cents to $4.53, with over 44 million changing hands, suggesting the Street expects a potential rival bidder. PotashCorp shares gained 48 cents to $143.31.

U.S. markets were mixed but slightly lower as investors remained jittery over whether an Irish bailout package would help contain Europe’s financial crisis or whether more may be needed.

The Wall Street decline was led by the financial sector after a Federal Bureau of Investigation raid on two hedge funds linked to a broader insider-trading probe.

The Dow Jones industrial average fell 24.97 points to 11.178.58. The Nasdaq composite index gained 13.9 points to 2,532.02, while the S&P 500 index lost 1.89 points to 1,197.84.

Developments in Ireland will likely dominate global market sentiment during what could be an otherwise quiet week as U.S. markets shut down mid-week as traders begin the U.S. Thanksgiving break which begins Thursday.

Details were scarce on Ireland’s application for financial aid from its European neighbours, but the package is expected to be worth anywhere from euro80 billion to euro100 billion.

Investor uncertainty still lurks due to questions over whether the Irish austerity program will work and as eyes turn to whether other highly indebted euro countries — particularly Portugal and Spain — will be next.

“While the news calmed the markets initially, more and more observers are arguing that Ireland, Greece and even Portugal may still face default,” said Bob Tebbutt of Peregrine Financial Group.

“Their small economies can not handle the massive debt and other countries are getting more and more reluctant to provide the funds needed.”

The Irish government confirmed Sunday it was formally requesting a financial aid package to shore up its debt-laden banking sector. Details are expected to be released later in the week following talks between the Irish government and officials from the European Union and the International Monetary Fund.

The country could be forced to make further massive spending cuts and raise its very low corporate tax rate.

Ireland’s rescue, which follows Greece’s in May, is the EU’s latest attempt to win back market confidence and keep its euro currency union from unravelling.

Prime Minister Brian Cowen’s government faced an immediate threat to its survival as coalition allies in the Green party — stung by Ireland’s surprise weekend announcement to seek a bailout — threatened to withdraw unless he announces a January national election.

In Canadian corporate developments, Shoppers Drug Mart Corp. (TSX:SC) says it’s being sued for $1 billion by two of its licensed associate-owners, who are alleging breach of contract by the Toronto-based pharmacy company. Shares in Shoppers fell 14 cents to $37.49.

Canadian engineering company SNC-Lavalin (TSX:SNC) says it has been awarded a contract to provide engineering, procurement and construction management services for the Jabal Sayid copper concentrator project in Saudi Arabia. Shares in the company lost 39 cents to close at $55.08.