Source: The Canadian Press

The Toronto stock market backed off Tuesday as European government debt worries pushed the U.S. dollar higher and commodity prices sharply lower.

The S&P/TSX composite index fell 133.18 points to 12,602.23 while the TSX Venture Exchange lost 59.22 points to 1,922.87.

The Canadian dollar moved lower against the American currency, losing 1.29 cents to 97.83 cents US.

Resource stocks led the selloff as investors also fretted over likely moves to slow the Chinese economy.

Markets have been depressed over the past week on concerns that Chinese monetary authorities will be raising interest rates to cool a property boom and dampen inflationary pressures. Strong demand for oil and metals from China and a weaker U.S. dollar for much of 2010 have driven up commodity prices.

“This fear is always overhanging the market when (China is) still the largest user of copper, aluminum and on and on,” said Bob Tebbutt, vice-president at Peregrine Financial Group Canada.

“Number 2 concern is the European sovereign debt situation and that Ireland may be worse than Greece. That’s making the euro weak (and) with the euro weak because of the concerns of Ireland, the weak euro makes a stronger U.S. dollar and a stronger U.S. dollar is hitting all U.S. priced commodities as well.”

Investors are also waiting to see if Ireland relents and requests a financial aid package at a meeting of eurozone finance ministers.

Although the Irish government has been saying it doesn’t need any money as it’s fully funded until the middle of next year, there’s mounting pressure on Dublin to agree to a rescue deal amid worrying signs that Europe’s debt crisis will create a domino effect.

Portugal is widely considered to be next in the line of fire.

Meanwhile, the European Union’s monetary chief says Ireland’s debt crisis is all about its troubled banks and that the shared euro currency is not in danger.

A combination of a stronger U.S. dollar and demand concerns pushed the December crude contract on the New York Mercantile Exchange down $2.52 to US$82.34 a barrel and pushed the energy sector down 1.83%. Suncor Energy TSX:SU) lost 75 cents to C$33.67 while Canadian Natural Resources (TSX:CNQ) was down 85 cents to $38.70.

The base metals sector fell 3% as metal prices also backed off with the December copper contract on the Nymex down 20 cents to US$3.73 a pound. Teck Resources (TSX:TCK.B) declined $1.20 to C$48.16 while Lundin Mining Corp. (TSX:LUN) lost 20 cents to $6.39.

Gold stocks were also a major decliner as the December gold contract in New York was down $30.10 to US$1,338.40 an ounce. Kinross Gold Corp. (TSX:K) faded 34 cents to C$17.80 while Barrick Gold Corp. (TSX:ABX) stepped back 62 cents to $49.99.

Most sectors contributed to TSX weakness. In the financial sector, Scotiabank (TSX:BNS) gave back 32 cents to $52.63 while Bank of Montreal (TSX:BMO) shed 43 cents to $58.27.

New York markets also registered sharp losses with the Dow Jones industrial average down 178.47 points to 11,023.5.

The Nasdaq composite index lost 43.98 points to 2,469.84 while the S&P 500 index was down 19.41 points to 1,178.34.

In economic news, Canadian manufacturing sales decreased 0.6% in September to $45.1 billion, with the sales decline concentrated in Central Canada’s transportation equipment industry. Sales in the transportation equipment industry declined 7.5% in September to $7 billion. The largest contributor was the motor vehicle industry, where sales fell 10.4%.

On the corporate front, General Motors said it is raising the price range for its initial public offering of common stock to US$32 to $33 per share. The new price range is about 14% higher than originally expected. The IPO is expected Thursday.

Shareholders with Australian grain producer AWB Ltd. have voted 80% in favour of a takeover by Canadian fertilizer maker Agrium Inc. (TSX:AGU). An application will be made for court approval on Wednesday, and if approved, the $1.1 billion transaction should be completed by Dec. 3. Agrium shares added 12 cents to $80.13.

Wal-Mart Stores Inc. is reporting a 9.3% increase in third-quarter net income to US$3.44 billion. Excluding a tax benefit, the company earned 90 cents per share, which matched Wall Street estimates. The company also is raising its full-year quarter profit outlook and its shares climbed 31 cents to US$54.26.

Home Depot Inc. said Tuesday a tight lid on expenses helped the largest U.S. home-improvement retailer’s third-quarter net income rise 21% to US$689 million. Revenue increased just 1% as home owners continue to hold back on bigger renovation projects. The company trimmed its revenue guidance for the year but raised its expectations for earnings and its shares gained 32 cents to US$31.71.

Sears Canada Inc. (TSX:SCC) shares fell 67 cents to C$19.68 after it reported that third-quarter revenue and same-store sales fell by 8.2% from a year ago. Total revenue was $1.2 billion, down from $1.3 billion, while net income dropped to $18.5 million from $47.1 million.