TSX sheds100 points as traders lose confidence in Greece

The S&P/TSX composite index was off 101.72 points to 12,172.04. The TSX Venture Exchange fell 25.01 points to 1,737.84.

Wall Street also closed lower after posting one of its best weeks in months last week.

The Dow Jones industrial average shed 108.08 points to 11,401.01. The Nasdaq index lost 9.48 points to 2,612.83 and the S&P index fell 11.92 points to 1,204.09.

Greece’s finance minister and international debt inspectors ended a conference call Monday night without a decision on whether the inspectors will return to Athens, a vital point that could affect whether the nation gets more bailout funds or defaults on its debts.

Global markets were skeptical about whether it will be able to get its fiscal house in order in a hurry and stocks fell around the world.

European finance ministers said Friday they would delay authorizing a new instalment of emergency funds for Greece until October. Investors fear that the country will fail to convince lenders that it can pay its debts.

The Greek cabinet is preparing to devise new austerity measures, but the country risks not qualifying for an $11 billion instalment of the bailout package it received last year, as well as a second bailout worth $149 billion. If Greece were to default on its debt, other debt-laden European countries would likely be judged less credit-worthy and have difficulty borrowing money.

A wave of defaults in Europe could infect the global banking system and help put the brakes on a U.S. economic recovery, which would inevitably lead to a bigger slowdown in Canada. A global slowdown would mean less demand for crude, copper and other commodities produced in this country.

The Canadian dollar was off 1.11 cents to 101.04 cents US as investor concerns about Europe’s debt crisis fuelled a stronger U.S. dollar.

Oil prices were down $2.26 to US$85.70 a barrel. On the TSX, shares in Suncor Energy Inc. (TSX:SU) slipped 23 cents to C$29.40.

Gold prices lost $35.80 to US$1,781.30 an ounce. Shares in Barrick Gold Corp. (TSX: ABX) added 36 cents to C$52.88. Copper prices slid 15 cents to US$3.78 a pound. On the TSX, shares in Teck Resources Ltd. (TSX:TCK.B) lost $1.45 to $37.65.

The mining sector led the way lower, with a 4.6% decline.

The European situation and sharply lower commodity prices are putting pressure on markets, said Bob Tebbutt of Peregrine Financial Group Canada Inc.

“(Metals prices) are sharply lower today as the weekend conference of European finance ministers failed to encourage the market when they pressed the Greek government to speed up their process to meet their deficit targets of face default,” he said.

“Copper is trading sharply lower with it hitting levels not seen since December of last year as the concerns over Greek, with Spain, Portugal, Italy and Ireland also making it possible that Europe will be in serious financial difficulties for some time yet.”

While investors keep a close watch on the internal debate in Greece, they are also monitoring developments in Germany after Angela Merkel’s government suffered a big electoral defeat in Berlin, which more or less wiped out her FDP coalition partners.

The failure to reach an agreement in Europe is not just “political noise,” instead it has serious market implications, said John Higgins, an analyst at Capital Economics.

“The lack of agreement on fundamental issues is a major barrier to co-ordination of macroeconomic policy responses to the many threats to the global economy and financial system,” he said.

“The markets had (initially) been impressed last week by the joint action by five major central banks to offer dollar liquidity, but that was a relatively uncontroversial move and at best a temporary solution to just one symptom of the underlying problems.

Also on Monday, U.S. President Barack Obama proposed a more than $3 trillion plan to shrink the nation’s debt, with roughly half of the money coming from tax increases on the wealthy and corporations.

Obama’s goal is try to influence a special joint committee of Congress that is charged by the end of November with coming up with deficit reductions of up to $1.5 trillion over 10 years. He wants lawmakers to aim even bigger.

Investors will also be closely watching Wednesday’s interest rate policy announcement from the U.S. Federal Reserve.

Some expect the Fed to introduce new measures to help boost the economy, which is seeing a slowdown in growth. But, many analysts think the Fed will fall short of announcing another monetary stimulus program given inflation levels remain relatively elevated.

On the Canadian calendar this week, investors can expect to see data on leading indicators, wholesale trade, the consumer price index and retail trade figures.

In domestic corporate news, Air Canada (TSX:AC.B) and its flight attendants were negotiating non-stop Monday in an effort to reach a deal ahead of a strike deadline later this week — and also to avoid certain intervention by the federal government to impose a settlement. Stock fell 1.8% or three cents to $1.59.

Children’s television producer and distributor DHX Media Ltd. (TSX:DHX) says its net income was $1.7 million, or three cents per share, for the full year ended June 30. That’s up from a loss of $813,000, or two cents per share, in the prior year. Revenues increased 35% to $54.7 million from $40.5 million. Shares in the company lost 4.7% or four cents to 81 cents.

Agnico-Eagle Mines Ltd. (TSX:AEM) is increasing its position in Mexico with the purchase of gold explorer Grayd Resource Corp. for $275 million, sending shares in the junior company up 40%. Shares added 22 cents to $67.20.