TSX falls 2% on Greek default worries
Loonie briefly slips below parity with U.S. dollar
The Toronto stock market closed down nearly two per cent Monday as investors worried about a potential default by the Greek government on its loans.
The S&P/TSX composite index was down 1.96 per cent, or 242.29 points, at 12,145.25.
The Canadian dollar briefly slipped below parity with the U.S. greenback, but closed at 100.80 cents US, up 0.40 of a cent from Friday's close.
The Canadian dollar hasn't had a close below $1 US since Jan. 31, 2011, when it closed at 99.85 cents US.
Investors have been moving to the safety of the U.S. dollar amid concerns about European banks and the possibility that Greece may default on its loans.
"The last couple of days has really been dominated by concerns about Europe," said Craig Alexander, senior vice-president and chief economist for TD Bank.
"We have seen a very slow moving train wreck in Europe. Ever since March of 2010, there was concerns that Greece could default on its debt and there has been numerous policy efforts to try and prevent that outcome.
"Unfortunately, European policy-makers just have not seemed to get ahead of the issue, and as a consequence, on Friday and today, there was increased chatter about the possibility of a debt default by Greece."
A tumble in the price of gold weighed on the index. The December price for gold finished down $46.20 US an ounce to $1,813.30.
Crude oil prices bounced back from earlier losses. October crude added 95 cents to $88.19 US a barrel.
The Dow Jones industrial average was higher by 68.99 points, or 0.63 per cent, at 11,061.12, while the Nasdaq composite index was up 27.10 points, or 1.1 per cent, at 2,495.09. The S&P rose 8.04 to close at 1,162.27.
Struggling under a mountain of debt, Greece must keep to its austerity plan if it wants to continue to secure continued funding from an international bailout worth more than 200 billion euros. If Greece defaults, it could send shockwaves through the global financial system.
"Greece basically has its back against the wall," said Tom Kaan, head of equity sales at Louis Capital Markets in Hong Kong. "Having said that, the concern I have is no longer Greece. Greece has to default."
Kaan said the larger concern is whether other European countries like Italy will follow.
"We'll see still more sludge on the downside before things get better," he said.
European stocks suffered heavily on Monday. Britain's FTSE 100 index shed 1.6 per cent, while Germany's DAX dropped 2.3 per cent. France's CAC-40 retreated four per cent amid speculation that Moody's might downgrade the ratings on some major French banks that carry heavy exposure to Greek debt.
With files from The Canadian Press