The Toronto stock market was lower Thursday, adding to a string of losses amid a lack of confidence lawmakers can stop the U.S. economy from going over the so-called fiscal cliff and data showing the 17-country eurozone has fallen back into recession.

The S&P/TSX composite index was lower by 143 points, or 1.2 per cent, at 11,786 early in the afternoon. A 205-point tumble yesterday left the index in negative territory for the year.

The Canadian dollar gained 0.09 of cent to 99.71 cents US after the U.S. Federal Reserve indicated further quantitative easing could be on the way. This involves the central bank printing more money in order to buy up bonds.

On the economic front, Statistics Canada said manufacturing sales rose 0.4 per cent in September to $49.8 billion, reflecting higher production in the aerospace industry and higher sales of primary metals.

U.S. markets were lower as the Dow Jones industrials stepped back 52 points to 12,519, the Nasdaq fell 16 points to 2,831 and the S&P 500 index edged lower by five points to 1,350.

North American indexes racked up substantial losses Wednesday in the wake of a news conference by president Barack Obama, where he made it clear that higher taxes on upper income earners will have to be part of any deal to deal with the huge U.S. deficit.

The fiscal cliff refers to a series of tax cuts from the Bush era due to expire at the first of the year. This would raise tax bills for almost all Americans. As well, huge spending cuts are automatically set to take effect, which would take a huge chunk out of U.S. gross domestic product and likely push the U.S. economy back into recession, taking other countries' economies with it.

Such a scenario is bad news for a resource heavy market like Toronto's as slowing economies in other countries will slash demand for oil and metals, putting pressure on mining and energy stocks.

The TSX has fallen 3.5 per cent this past week to a two-month low after the results of the U.S. election essentially left the political landscape unchanged, making it clear it would be difficult to arrange a compromise in Washington.

Losses have been even worse in New York as American investors have sold off across all sectors on the expectation of having to pay higher dividend and capital gains taxes at the beginning of the year. The Dow has plunged 5.1 per cent over the last week.

Worries about the health of the global economy intensified Thursday after official figures showed that the worsening debt crisis resulted in the eurozone contracting by 0.1 per cent in the July-to-September period from the quarter before as economies including Germany and the Netherlands suffer from falling demand. That followed a 0.2 per cent pullback in the previous quarter.

And with economic conditions particularly bad for the southern European members of the monetary union, there are worries that the recession will deepen and make the eurozone government debt crisis even more difficult to handle.

Gold prices and stocks headed lower amid data showing global gold demand fell in the third quarter as investors bought fewer bars and coins and buyers in China held back because of the economic slowdown. The World Gold Council said about 1,085 metric tons of gold was sold worldwide in the three months through September, down 139 metric tons, or 11 per cent, from a record 1,223.5 tonnes in the same period of 2011.

December bullion fell $16.80 to $1,713.30 US an ounce.

December copper was up a penny at $3.46 US a pound.

The December crude contract on the New York Mercantile Exchange fell $1.44 cents to $84.88 US a barrel.

European markets closed lower as London's FTSE 100 index lost 0.77 per cent, Frankfurt's DAX dropped 0.82 per cent while the Paris CAC 40 fell 0.52 per cent.