Source: The Canadian Press

The Toronto stock market closed in the red Tuesday as a record-high gold price wasn’t enough to offset some fresh concerns about the health of European banks and weakness in other commodities.

The S&P/TSX composite index lost 42.94 points to 12,101.98.

The gold sector helped to moderate weakness in other areas of the market, gaining 1.5% as the price of bullion closed at an all-time high on the New York Mercantile Exchange.

The December gold contract gained $8.20 to US$1,259.30 an ounce as jittery investors moved into the safe-haven investment. Shares in Barrick Gold Corp. (TSX:ABX) added 84 cents to $47.93.

Many of the other major sectors of the TSX moved lower. The financial sector fell 0.8% amid reports that Europe’s major banks have more potentially risky government debt on their books than was disclosed during stress tests earlier this year.

The reports renewed worries about Europe’s government debt, which had flared up earlier this year following a fiscal crisis in Greece that spread to other weak European economies and helped bring stock prices down worldwide.

“It appears as though there was some weakness emanating out of Europe and concerns about the financial sector and some of the stress testing of the banks, so I think there’s some spillover effect,” said Gary Aitken, director of equity research at Bissett Investment Management in Calgary.

“What really comes back into play here is some of these broader issues that the market’s still wrestling with, like where is this global economic growth trajectory going to settle out?”

Shares in Bank of Nova Scotia (TSX:BNS) lost 50 cents to $52.44 after the bank said it is introducing a separate global wealth management division.

The energy sector fell 1.1%. The October crude contract on the New York Mercantile Exchange lost 51 cents to US$74.09 a barrel as fears about the global economy resurfaced amid worries about the health of European banks. Shares in Suncor Energy Inc. (TSX:SU) fell 43 cents to $33.47.

The base metals sector was the biggest loser Tuesday, tumbling 2% as the December copper contract fell 2.95 cents to US$3.47 per pound.

Shares in Teck Resources Ltd. (TSX:TCK.B) were down 96 cents or 2.4% to $38.74.

The Canadian dollar fell 0.8 of a cent to 95.42 cents US ahead of the Bank of Canada’s interest rate announcement Wednesday.

Economists believe the central bank will overlook recent disappointing economic data and continued U.S. weakness and hike the trend-setting rate a quarter point to one%.

The TSX Venture Exchange rose 29 points to 1,594.96.

On Wall Street, stock markets took a hit from the renewed uncertainty overseas. The Dow Jones industrial average fell 107.24 points to 10,340.69, while the Nasdaq composite index was down 24.86 points to 2,208.89. The S&P 500 lost 12.67 points to 1,091.84.

In economic news, the European Union has agreed to create new financial oversight institutions, hoping to prevent a repeat of the government debt crisis that nearly left Greece bankrupt and brought the European banking system to its knees earlier this year. However, the finance ministers failed to agree on the introduction of a levy on banks or a new tax on financial trading.

And the U.S. government is trying to jump-start its sputtering plan to tackle the foreclosure crisis with an effort to assist up to 1.5 million homeowners who owe more on their properties than their homes are worth.

In corporate news, Biovail Corp. (TSX:BVF) shares jumped $2.58 or 10.3% to $27.52 after U.S.-based Valeant Pharmaceuticals International said a combination of the two companies would result in US$300 million in cost savings. The news sent the Toronto health-care index up 3.4%, making it the biggest gainer Tuesday on the TSX.

Shares in Alimentation Couche-Tard Inc. (TSX:ATD.B) fell 54 cents or 2.3% to $23.46 after Casey’s General Stores (Nasdaq:CASY) rejected the convenience store chain’s latest takeover offer and said it has decided to conduct negotiations with another suitor.

Potash Corp. of Saskatchewan’s shares (TSX:POT) added $2.05 to $156.60 after the company’s CEO said Australia’s BHP Billiton won’t be its only suitor. Bill Doyle said a number of parties have expressed an interest in alternative transactions, although he didn’t name any of the potential bidders.

And Toronto-based miner Marathon PGM Corp. (TSX:MAR) saw its stock soar by $1.77 or 94.2% to $3.65 after it agreed to be taken over by Stillwater Mining Co. (NYSE:SWC) for US$118 million.