TSX, Dow end with solid gains

Stock markets shrugged off large early losses and ended higher on Friday.

North American stock markets shrugged off large early losses and ended higher on Friday.

The benchmark Canadian S&P/TSX composite index closed up 115.4 points, or more than one per cent, to 11,521.35. In New York, the Dow Jones industrial average finished the day with a gain of 125.38, at 10,193.39, while the broader S&P 500 ended up 16.10 points to 1,087.69.

The tech-focused Nasdaq index was 25.03 points higher, at 2,229.04.

"A lot of this is speculation," Andrew Pyle of Scotia Capital said. "A lot of it is nerves."

Earlier, European stock markets were in the red on sovereign debt fears. On Friday, the German parliament approved the country's share of a $1-trillion US plan to help contain debt problems in the European Union, but it wasn't enough to buoy markets.

In European trading, Britain's FTSE 100 closed down 0.20 per cent. Germany's DAX index fell 0.66 per cent while France's CAC-40 dipped 0.05 per cent.

A man walks past a full green board signifying a massive drop in Taiwan stocks inside a brokerage in Taipei on Friday. ((Nicky Loh/Reuters))

Earlier, Japan's Nikkei 225 stock average lost 245.77 points, or 2.5 per cent, to 9,784.54, while Australia's S&P/ASX 200 index eased by 0.3 per cent to 4,305.40.

Shanghai bucked the Asian selling trend, gaining 1.1 per cent.

The selling in Europe and Asia came a day after a deep North American sell-off. The Dow Jones industrial average lost 375 points Thursday, a drop not seen in more than a year.

"We've now turned a debt problem into a U.S. economic problem — a valuation problem — and I think the market is just getting a little too spooked right now," Pyle said.

The reason for the growing fear is that soaring national debt levels — in countries such as Greece and Portugal — could be too much for some countries to handle.

In Toronto on Thursday, the S&P/TSX composite index shed 259.8 points — a drop of more than two per cent — to close at 11,406.

Market watchers warn that the current market anxiety could have repercussions for lending.

"If the capital markets don't straighten themselves out reasonably soon, you run the risk of freezing up the credit markets again," said Jim Awad, managing director at Zephyr Management in New York.

"That could have the impact of putting caution into the hands of consumers and business people, which means the recovery could abort," he said.

After a drop of more than two cents US on Thursday, the Canadian dollar made up some ground on Friday. The loonie closed up 0.75 cent at 94.40 cents US.  

With files from The Associated Press