Toronto stock market adds to string of losses

“This week has been all about Europe and we’re down because of Europe,” said Gareth Watson, vice-president investment management and research at Richardson GMP Ltd.

The Canadian dollar was down 0.23 of a cent to 95.29 cents US.

Italy had to pay an average yield of 7.814% to raise €2 billion in two-year bills, much higher than the 4.628% it had to pay in the previous auction in October. Higher yields are an indication of uncertainty that the debts will be repaid.

Raising €8 billion for six months proved exorbitantly expensive. The yield for this auction spiked to 6.504%, nearly double the 3.535% rate in the last equivalent auction last month.

Traders returned to U.S. markets for a shortened session following the Thanksgiving holiday.

New York markets closed lower with the Dow Jones industrial index down 25.77 points to 11,231.78, adding up to a loss of 564 points or 4.78% this past week.

The Nasdaq composite index shed 18.57 points to 2,441.51 while the S&P 500 index declined 3.12 points to 1,158.67.

U.S. markets had earlier found support from a positive start to Black Friday, the kickoff of the retail holiday shopping season in the U.S.

“It would appear at least the Black Friday sales are hopefully going to be meeting the expectations of what the street is looking for this year,” added Watson.

Early signs pointed to bigger crowds at U.S. malls and stores as retailers like Macy’s and Target opened their doors at midnight. Toys “R” Us and a few other stores that opened on Thanksgiving Day were also filled with shoppers.

But worries about Europe trumped that early enthusiasm going into the weekend as Italy’s borrowing rates in the markets skyrocketed in the wake of the auctions, with the 10-year yield spiking 0.34 of a percentage point to 7.3%.

That is above the seven per cent threshold that is widely considered unsustainable and eventually forced Greece, Ireland and Portugal had to seek financial bailouts.

However, with debts of around €1.9 trillion, or a huge 120% of its economic output, Italy is considered too big to bail out.

Markets have been in a deep funk for weeks over the failure of eurozone leaders to come up with a comprehensive fix for the debt crisis, which threatens a fragile global recovery, the region’s financial system and the euro itself.

There have been calls for the European Central Bank to deal with the debt crisis by declaring itself lender of last resort and printing money to buy the bonds of debt-laden eurozone countries. But both the ECB and the German government are loath to do that, warning that it lets the more profligate countries off the hook for their bad practices.

For the same reason, Germany has opposed the use of eurobonds which would be backed by the eurozone’s 17-member countries.

The TSX energy sector fell 0.71% while the January crude contract on the New York Mercantile Exchange gained 60 cents to US$96.77 a barrel. Suncor Energy (TSX:SU) fell 61 cents to $28.14 while Canadian Natural Resources (TSX:CNQ) was down 78 cents to $33.96.

The TSX gold sector was also lower as the December bullion contract moved down $10.20 to US$1,685.70 an ounce. Goldcorp Inc. (TSX:G) gained 11 cents to $50.38 while Iamgold (TSX:IMG) faded 21 cents to $19.22.

The base metals component fell 0.26% with the December copper contract in New York off a penny to US$3.27 a pound. Teck Resources (TSX:TCK.B) gave back 66 cents to $32.66 and Quadra FNX Mining (TSX:QUX) moved down seven cents to $9.44.

The financial sector shed 0.31% with Royal Bank (TSX:RY) down 50 cents to $43.40 and Sun Life Financial (TSX:SLF) lost 10 cents to $18.32.

Tech stocks were also a drag as Celestica (TSX:CLS) gave back nine cents to $7.98.

After European markets closed, Standard & Poor’s said it was lowering its long-term sovereign credit rating for Belgium, citing the country’s lack of a permanent government and a looming European recession that threatens the country’s exports.

In a sign that financial contagion is spreading across Europe, the agency cut Belgium’s credit rating from AA-plus to AA.

European bourses had closed higher as London’s FTSE 100 index was up 0.72%, Frankfurt’s DAX advanced 1.19% and the Paris CAC 40 gained 1.23%.