The Toronto stock market closed just shy of a triple digit loss Monday as a dour new assessment of Europe’s economy and lower oil and gold stocks put pressure on the main index.
The S&P/TSX composite index lost 95.68 points to 11,539.7. The junior Venture Exchange closed 18.7 points lower at 1,407.39.
Wall Street also closed negative, with the Dow Jones down 100.13 points at 11,766.26. The Nasdaq slid 32.19 points to 2,523.14 and the broader S&P 500 shed 14.3 points at 1,205.35.
Losses on North American markets accelerated after the president of the European Central Bank said his institution is seeking ways to keep the eurozone’s bailout fund effective even if France and other countries lose their AAA debt ratings.
Mario Draghi was speaking to lawmakers at the European parliament just before European Union finance ministers failed to come up with $261 billion in new loans for the International Monetary Fund. Failure to come up with the full amount that was promised signals rifts within the European Union and how difficult it will be for leaders to agree on a solution for the debt crisis.
The Canadian dollar shed 0.16 of a cent to 96.27 cents US, after making early gains following the release of statistics showing wholesale trade grew more than expected in October.
Statistics Canada said wholesale sales increased 0.9% to $49.2 billion in October, with the growth concentrated in the western provinces. Analysts had been expecting a smaller 0.1% gain.
John Johnston, chief strategist at Davis Rea Ltd. said a short-lived rally over the past few weeks could be coming to an abrupt end. He cautioned that while there are no big announcements planned this week, markets are particularly vulnerable if sentiment turns on a dime, as trading volumes are low ahead of the Christmas holiday period.
“We’re now winding down the year, I don’t think you’re going to see a lot of activity, I think a lot of the tax-loss selling is there, maybe you get a bit of window dressing,” he said.
“What we’re left with in these quiet times is the global economy’s downshifting the emerging markets are downshifting (and) Europe is in recession.”
Commodities were mixed, with the January oil contract up 35 cents to US$93.88 a barrel in New York.
The February gold contract lost US$1.20 to US$1,596.70 an ounce while copper shed two cents to US$3.31 a pound.
The commodity-related indexes weighed on the broader Toronto Stock Exchange.
The global gold sector fell 2.2%, while the energy index was down 1.4% and the mining sector shed 1.7%.
Investors also weighed the potential consequences of the death of North Korea’s ruler, Kim Jong-Il. The announcement, made Monday by North Korean state television, raised the spectre of more instability on the divided Korean peninsula.
Analysts warn that Kim’s death could cause an uncertain power transition and put the brakes on talks aimed at getting the secretive communist state to give up its nuclear weapons.
But Johnston said the development is likely a “a non-event” that shouldn’t affect markets in the long-term. He said he’ll keep an eye on the situation, but it does little to change his already negative sentiment about how markets will close 2011.
Kim Jong-Un, the supreme leader’s untested third son and heir-apparent, is expected to want to consolidate his power and dispel any notions of weakness.
Kim’s death added to what already was a gloomy start to the week after Fitch warned after the market close on Friday that it may downgrade the credit ratings of eurozone heavyweights Italy and Spain, as well as Belgium, Cyprus, Ireland and Slovenia.
Meanwhile, it’s a light week for economic data heading into the four-day Christmas shutdown on the TSX.
In the U.S., a private index showed that builders are less worried about the housing market this month. The National Association of Home Builders/Wells Fargo builder sentiment index was a rare upbeat sign for the beleaguered industry. It suggested slightly less pessimism for the housing market. That could mean an uptick in home construction and increased use of diesel-burning equipment.
In domestic news, Eldorado Gold Corp. (TSX:ELD) said Sunday it has struck a friendly, C$2.5-billion takeover deal for European Goldfields Ltd. (TSX: EGU), a Yukon-based gold miner with projects in Greece, Romania and Turkey. Eldorado shares lost 12.5% or $1.93 to $13.46. European Goldfields shares fell 4.7% or 56 cents to $11.28.
Meanwhile shares of market heavyweight Research In Motion (TSX:RIM) continued a downward slide that weighed on the TSX in the second day of trading after it released disappointing quarterly results and holiday forecast. Its shares closed down 4.3% or 60 cents each at $13.37.