Source: The Canadian Press

The Toronto stock market closed lower Wednesday after volatility hit the TSX in the last hour and erased solid early gains that followed reassuring reports on the Chinese and American economies.

The S&P/TSX composite index came down from an advance of almost 100 points to close 66.54 points lower at 11,450.64 as gains melted away in the face of worries about the European debt crisis after the euro came under late-afternoon selling pressure.

The euro fell below the psychologically important US$1.20 level, trading at US$1.198 late in the day.

The euro has touched a string of four-year lows in recent days on worries about Europe’s weak growth prospects and the economic effects of deep cuts in public spending announced by major European countries, including Germany and Britain.

The TSX Venture Exchange was off 7.65 points at 1,444.01.

The Canadian dollar moved up 0.39 of a cent to 95.76 cents US.

Financial stocks led the way lower, with the sector down 1.15% as investors continue to worry about the strains being placed on the global financial system amid the government debt crisis in Europe. TD Bank (TSX:TD) was down 86 cents at $68.89.

Commodity prices headed higher following a report that Chinese exports grew 50% in May from a year earlier, well above expectations of a 32% rise, which raised hopes that demand will pick up for oil and metals and boost energy and mining stocks on the resource-heavy TSX. Also, new loans during May beat analyst estimates.

“It’s nice to see good news out of China,” said Chris King, portfolio manager at Morgan, Meighen and Associates.

“You have nothing going on in Europe and a tepid recovery in the U.S. — it’s all China or nothing.”

Official data from the Chinese government is to be released Thursday.

Markets had also responded well to a comment from U.S. Federal Reserve chairman Ben Bernanke that debt problems in Europe might only amount to a “modest” drag on the U.S. economy if the financial markets can halt their slide.

And the Fed’s latest regional survey showed that the economic recovery is finally spreading to all parts of the United States. But the modest pace of growth suggests companies won’t be ramping up hiring to quickly drive down unemployment.

The TSX energy sector edged up a slight 0.14% as the July crude contract on the New York Mercantile Exchange rose $2.39 to US$74.38.

Oil prices were also lifted by data from the U.S. Energy Information Administration which said oil stockpiles decreased by 1.8 million barrels in the week ended June 4, which was in line with expectations.

Suncor Energy (TSX:SU) rose 55 cents to C$32.50 while Canadian Natural Resources (TSX:CNQ) lost 47 cents to C$35.75.

Meanwhile, shares of BP fell almost 16% in New York on fears that it wouldn’t be able to recover from the costs of its oil spill in the Gulf of Mexico. A news report quoted an energy industry analyst as saying the company could be forced to seek bankruptcy protection in about a month.

The base metals sector also saw early gains drift away, rising just 0.21% even as copper prices jumped following the upbeat report on China. The July copper contract on the Nymex was up seven cents at US$2.85 a pound. Teck Resources (TSX:TCK.B) stepped back 27 cents to C$32.46 and Equinox Minerals (TSX:EQN) was off five cents at C$3.66.

Commodity prices have been under heavy pressure amid worries that demand will be weakened by the European debt crisis, a slowing Chinese economy and renewed doubts about the U.S. economic recovery following disappointing jobs data for May.

King said he was gratified to see copper rise as the metal acts as a barometer for many other areas.

“Copper tells you everything,” he said.

“It tells you a lot of the upfront spending that is going to happen in terms of housing, infrastructure, the things that build our society. I’m very focused on copper.”

The gold sector was the major decliner as bullion prices backed away from Tuesday’s record close. The August gold contract in New York fell $15.70 to US$1,229.90 an ounce and Barrick Gold Corp. (TSX:ABX) faded 94 cents to C$44.55.

New York markets also lost early headway as the Dow Jones industrial average moved 40.73 points lower to 9,899.25.

The Nasdaq composite index fell 11.72 points to 2,158.85, while the S&P 500 index lost 6.31 points to 1,055.69.

In corporate news, cheese, milk and bakery company Saputo Inc. (TSX:SAP) reported that quarterly profit was $99.1 million or 47 cents per diluted share, up 43% from a year earlier. However, revenue slipped by about 5% to $1.38 billion. Saputo said its revenue was eroded by the Canadian dollar’s strength and lower sales volumes, partially offset by higher prices and the acquisition of F&A Dairy. Its shares dipped 26 cents to $29.14.

Sporting goods retailer Forzani Group Ltd. (TSX:FGL) said Tuesday it narrowed its first-quarter loss as same-store sales grew by 9.8%. Forzani’s loss was $691,000 or two cents per share, compared with $1.1 million or four cents per share a year ago. Revenue was $228 million, up from $201.3 million in the first quarter of fiscal 2010. Forzani shares gained 65 cents to $16.90.

Grande Cache Coal Corp. (TSX:GCE) saw its fourth-quarter profit fall dramatically, despite higher volumes, as the average price per tonne of coal fell by about two-thirds compared with the same time last year. Its net income dropped to $1.4 million for the three months ended March 31, from $18.9 million a year earlier, even though revenue increased by 31% to $50.8 million. Its shares gained 39 cents to $5.28.

Western Coal Corp. (TSX:WTN) is offering to exchange common shares for the 45% of Energybuild Group PLC that it doesn’t already own in a deal that values the U.K. company at about C$82.1 million. Energybuild is developing the Aberpergwm mine and anthracite coal reserves in Wales. Western Coal shares gained 13 cents to $4.58.

Shares in Taseko Mines Limited (TSX:TKO) climbed two cents to $5.11 after it said it had received approval from the B.C. government for a 25-year mining lease on the Prosperity gold-and-copper project in the B.C. Interior.

Grain handler Viterra Inc. (TSX:VT) said that its second-quarter profits fell to $18.4 million, or five cents per share, from $26.3 million, or 11 cents per share in the same quarter last year. Revenues for the quarter ended April 30 rose to $2 billion from $1.6 billion a year earlier despite decreases in commodity prices relative to the year-ago period and its shares gained 27 cents to $8.04.

And shares in Hathor Exploration jumped 17 cents or 11.56% to $1.64 on the Venture Exchange after it said it has discovered the highest-grade intersections to date at its Roughrider uranium deposit in Saskatchewan.