Source: The Canadian Press

The Toronto stock market was lower Thursday as commodities prices fell back amid a higher U.S. dollar and worries that Europe’s sovereign debt problems could hurt demand for resources.

The S&P/TSX composite index was down 47.84 points at 13,181.23, while the TSX Venture Exchange rose 4.87 points to 2,105.81.

The Canadian dollar slipped 0.19 of a cent to 99.41 cents US.

Buying sentiment was overshadowed by Europe’s debt crisis, including the news Wednesday that Moody’s Investor Services may downgrade Spain’s public debt.

Moody’s warning put Europe’s debt crisis back to the forefront of investors’ concerns. Following was a similar warning Tuesday on Belgium from rival agency Standard & Poor’s, investors are again nervous that the debt crisis will spread, particularly to Spain, after bailouts of Greece and Ireland so far this year.

Risk aversion drove investors to the perceived safe haven of the U.S. dollar, which further weakened commodities.

Analysts said continued nervousness about government debt could continue to drive the greenback higher, applying even more pressure to commodity prices.

“The dominating thing that’s going to affect a lot of these commodity markets is a stronger U.S. dollar, (it’s) going to be a bit of a headwind for all these commodities,” said John Kurgan, senior markets strategist at Lind Waldock.

“The commodity that is holding up very well in all this is crude oil. If it holds at these levels, (and) these U.S. economic numbers get better, I could see crude oil trading north of US$100 a barrel in the first quarter of 2011.”

But on Thursday, oil prices fell below US$88 despite a plunge in U.S. crude supplies that suggested demand may be recovering.

The U.S. Energy Department’s Energy Information Administration said Wednesday that crude inventories fell 9.9 million barrels last week, the largest drop since 2002. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast a drop of three million barrels.

The January crude contract on the New York Mercantile Exchange lost 92 cents to US$87.70 a barrel and the energy sector lost 0.39%. Suncor Energy (TSX:SU) declined 44 cents to C$36.48.

Mining stocks also headed lower as metal prices stepped back with the March copper contract on the Nymex down two cents at US$4.12 a pound. The base metals sector retreated 1.31% with Equinox Minerals (TSX:EQN) down 14 cents to C$5.79 and HudBay Minerals (TSX:HBM) off 63 cents at $17.35.

The gold sector also lost ground as the February gold contract in New York lost $15.20 to US$1,371 an ounce. Barrick Gold Corp. (TSX:ABX) fell 78 cents to C$51.97 while Goldcorp Inc. (TSX:G) fell 69 cents to $45.29.

Agnico-Eagle Mines Ltd. (TSX:AEM) said it will boost its dividend to 16 cents per share per quarter or 64 cents US per year, up from its current payment of an annual dividend of 18 cents per share. Its shares fell $4.63 to C$76.16.

Defensive stocks were popular with investors.

The utilities sector was ahead 0.49% as TransAlta Corp. (TSX:TA) gained 23 cents to $21.71.

And the consumer staples index ran ahead 0.62%.

Shares in George Weston Ltd. (TSX:WN), the Toronto-based food processor and distributor and majority owner of the Loblaw (TSX:L) supermarket chain, jumped $3.48 to $82.86 after it said it will pay a special one-time dividend totalling $1 billion to its shareholders. The payment will amount to about $7.75 per share for shareholders of record at the close of business on Jan. 18.

New York markets were higher amid data which showed that fewer people applied for unemployment benefits last week, the third drop in the past four weeks and a sign that the job market is slowly improving.

Weekly claims for jobless aid dipped by 3,000 to a seasonally adjusted 420,000.

The Dow Jones industrial average gained 41.78 points to 11,499.25.

The Nasdaq composite index gained 20.09 points to 2,637.31 while the S&P 500 index rose 7.64 points to 1,242.87.

New York markets moved off early highs after the Federal Reserve proposed a 12-cent cap on the fees merchants pay for debit card transaction processing. Such a limit could sharply cut into the revenue of major banks and card networks like Visa Inc. and MasterCard Inc. Shares in both credit cards took a hit, with Visa losing 12.67% to US$67.19 and MasterCard falling 10.3% to US$223.49.

In other corporate news, travel company Transat A.T. Inc. (TSX:TRZ.B) says profits rose to $52.4 million in the fourth-quarter as it booked lower non-cash losses related to fuel hedging. Revenues were $778.6 million, up from $719.7 million and its shares gained $1.73, or 9.75%, to $19.48.

FedEx Corp. rose 1.83% to US$94.22 after the company raised its earnings predictions for next year because businesses and consumers are shipping more packages.