The Toronto stock market recovered from sharp losses Tuesday, even as worries about the European debt crisis and its effect on a global economic recovery showed no signs of going away any time soon.
The S&P/TSX composite index erased much of its losses, coming to within sight of the breakeven points, before settling 3.27 points to 11,518.08. The index had capsized as much as 180 points during the day.
Investors again fled to the safe haven status of U.S. Treasury Bills, which sent other currencies reeling.
Falling commodity prices also helped push the Canadian dollar lower.
On the Toronto market, the energy sector was lower as Suncor Energy gave back 55 cents to $30.64 while Canadian Natural Resources was down 46 cents to $34.23.
The July copper contract in New York declined 10 cents to $3.05 U.S. a pound, pushing the base metals sector down 5.9%. Teck Resources regained 55 cents to $34.30.
First Quantum Minerals tumbled $7.59 or 12.1% to $55.20 on negative news from the Democratic Republic of Congo, where the company has its Frontier copper project.
Katanga, Congo’s southern mining province, has imposed a $60-U.S.-per-tonne tax on semi-finished product exports, which include the copper concentrate from which the metal is derived.
The financial sector lost ground after news that four Spanish savings banks have announced plans to merge amid concerns over solvency in the sector.
The move, announced late Monday, came after the Bank of Spain bailed out Andalusian savings bank Cajasur over the weekend, after its merger talks broke down.
Royal Bank fell 62 cents to $58.86 and Scotiabank was down 13 cents to $49.37.
Gold prices were up and the bullion sector was one of the few positive groups on the TSX.
Barrick Gold Corp. improved $1.82 to $45.20 while Goldcorp Inc. rose $2.08 to $45.44
In corporate news, Maple Leaf Foods said it is renewing efforts to sell its Ontario pork processing business in Burlington, Ont. It said that the sale of the operation would be the last phase of a strategic refocusing of its business activities. Maple Leaf shares moved 23 cents higher to $9.57.
Stem Cell Therapeutics Corp. shares tumbled 29.5 cents or 74.68% to 10 cents after second-stage tests for a drug intended to treat strokes failed.
The Canadian dollar slipped 0.57 cents to 93.63 cents U.S.
ON BAYSTREET
Eight of the 14 TSX subgroups were lower. Metals and mining were off 2%, while energy suffered 1.5% and information technology stocks skidded 1.3%.
Gainers were led by gold, picking up 4.6%, materials, moving ahead 0.38%, and consumer staples, advancing 0.7%.
The TSX Venture Exchange gave back 1.42 points to 1,451.97, while the Nasdaq Canada index moved 3.68 points lower to 669.13
ON WALLSTREET
In New York, equities drifted lower Tuesday on continued worries about the euro and global growth, but the selling was modest compared to the early morning decline, in which the Dow lost nearly 300 points.
The Dow Jones industrial average healed many of its wounds, but fell short of the breakeven level by 22.82 points, to finish at 10,043.75.
The S&P 500 index actually gained 0.38 points to 1,074.03. The Nasdaq composite index fell 2.60 points to 2,110.95.
Stocks have been sliding for most of the month on worries about how the European debt crisis will impact global growth. Meanwhile, the euro has been plunging, with the shared European currency dropping Tuesday to levels just above a four-year low that it hit earlier in May.
Greece's debt crisis sparked the initial worries about Europe that now encompass the other so-called PIIGS -- Portugal, Italy, Ireland and Spain. Spain has been in the news most recently after the country's central bank had to take over a long-established savings bank last weekend.
One expert said that U.S. exports will be constricted as European growth slows and multinational companies will feel the impact of the weaker euro. However, he added that what happens in China and other emerging markets is more directly tied to U.S. growth than what happens in Europe.
The Chinese government has taken steps to slow growth to tamp down inflationary pressure, but demand for all kinds of products and natural resources from emerging markets is expected to stay strong over the next few years.
The CBOE Volatility index, or the VIX, Wall Street's fear gauge, turned lower in the afternoon as stock selling eased and investors dipped back into select issues. The VIX fell 3% to 37.10 after rising earlier in the afternoon.
But even the earlier advance was modest compared to a week ago when the stock selloff was more intense. Last Thursday the VIX jumped 30% to settle at a 14-month high of 45.48.
Stocks are also vulnerable in the aftermath of a big rally that propelled the Dow 71% between the March 2009 lows and highs hit in late April. In that same time period, the S&P 500 gained 80% and the Nasdaq gained 99%.
Since those rally highs, the Dow has lost 10.2%, the S&P 500 has slipped 11.8% and the Nasdaq has dropped 12.5% through Monday's close.
A decline of more than 10% off the highs means the market has met the technical definition of a correction. The selling has also raised worries about whether stocks are heading into a bear market, technically a decline of 20% to 30% off the highs.
On the economic front, the Case-Shiller index of home prices in 20 U.S. cities showed home prices fell 3.2% quarter-over-quarter but have still managed to climb 2% year-over-year.
Consumer confidence for May rose, with a Conference Board index climbing to 63.3 from a downwardly revised 57.7 in April. Economists thought the index would rise to only 58.3.
Treasury prices jumped, lowering the yield on the 10-year note to 3.16% from 3.22% where it stood Monday. Treasury prices and yields move in opposite directions.
The price of a barrel of oil sank 80 cents to $69.41 U.S.
Gold prices gained six dollars to $1,199 U.S. an ounce
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