TSX gains as U.S. markets sell off

The Toronto Stock Exchange ended with a slight gain Wednesday, buoyed in part by gold shares, though U.S. markets plunged to erase Tuesday's gains.

Gold tops $1,800 US before closing at $1,784.30

A stock trader works at the stock exchange in Frankfurt on Wednesday. The DAX index of leading shares fell by around five per cent on renewed concerns about Europe's debt crisis and amid rumours of a French downgrade. (Frank Rumpenhorst/AFP/Getty)

The Toronto Stock Exchange ended with a slight gain Wednesday, buoyed in part by gold shares as bullion crossed over $1,800 US an ounce for a time, though U.S. markets plunged to erase Tuesday's gains.

Gold's rise reflected investors' hunger for a store of wealth amid worries that the global recovery is slowing and that Europe's debt crisis will spread to France.

In Toronto, the S&P/TSX composite index closed up 89.63 points, or 0.7 per cent, to 12,198.89, after swinging by almost 400 points between the day's high and low. The S&P/TSX gold index was up 4.9 per cent.

December bullion closed at $1,784.30 US an ounce, up $41.30.

On Tuesday, the TSX had soared 438 points as investors snapped up stocks that were beaten down during a market rout that carved 10 per cent from the TSX over the previous six sessions.

S&P/TSX 1-month global gold index

Also Wednesday, Finance Minister Jim Flaherty said the global economic uncertainty poses "obvious risks" to Canada but it won't change the government's plan to slash spending and balance the books.

In New York, meanwhile:

  • The Dow Jones industrial average finished with a loss of 519.83 points, or 4.62 per cent, to 10,719.94.
  • The Nasdaq composite was down 101.47, or 4.1 per cent, to 2,381.05.
  • The S&P 500 was lower by 51.77 points, or 4.42 per cent, to 1,120.76.

Asia opens lower

Asian markets headed lower Thursday over mounting concerns about the health of Europe's banks and France's debt rating.

Japan's Nikkei 225 index sank 1.3 per cent to 8,922.32, wiping out gains of the previous day. The country's strengthening currency clobbered Japan's behemoth export sector.

Honda Motor Corp. lost three per cent, while Nissan Motor Corp. stumbled 3.5 per cent. Toyota, Mazda and Sukuzi Motor Corps. each fell more than one per cent. Consumer electronics giants also slid:Sony Corp., by 2.4 per cent; Panasonic Corp., by 2.2 per cent.

Hong Kong's Hang Seng index stumbled 1 percent to 19,489.03, but South Korea's Kospi index reversed earlier losses and rose 0.8 per cent to 1,820.47.

Since the beginning of August, the S&P/TSX has fallen six per cent. The Dow has lost almost 12 per cent of its value, the Nasdaq 13 per cent and the S&P more than 13 per cent.

The latest fall came after North American markets staged their strongest one-day rally in two years on Tuesday. That rise came after the U.S. Federal Reserve promised to leave interest rates ultra-low until mid-2013.

"The rally was rather short-lived. It's now focusing on a loss of confidence," said Kathryn Delgreco, investment adviser at TD Waterhouse. "This market is not trading on fundamentals. It's trading on fear."

In Washington, U.S. President Barack Obama was meeting at the White House with Federal Reserve chairman Ben Bernanke, a day after the Fed announced it would offer super-low interest rates for two more years.

The move was an unprecedented step to stem an economic freefall that dragged the stock market down earlier this week.

Obama was also scheduled to meet with business leaders later in the week to discuss the downgrade of the U.S. credit rating by Standard and Poor's on Friday.

French bank shares fall

Shares in French banks — the most exposed to Italian and other troubled European economies — dropped despite assurances from government officials and rating agencies that France's triple-A credit rating is not under threat.

Traders also worried about what will happen to France's debt, which is 85 per cent of GDP, well above the eurozone's recommended 60 per cent.

On the Paris Exchange, French bank Société Géneralé's shares closed down almost 15 per cent, while stock in BNP Paribas was off more than nine per cent and Crédit Agricole fell almost 12 per cent.

President Nicolas Sarkozy cut short his vacation in the French Riviera Wednesday and promised to cut France's huge debts in response to rising concerns that the country's triple A debt rating could be cut.

Sarkozy summoned key government ministers for an emergency meeting after days of mounting warnings from analysts that the world's fifth-biggest economy can't afford to keep bailing out poorer European states.

European markets closed lower, with the Paris CAC 40 down 5.5 per cent, London's FTSE 100 index lower by 3.1 per cent and Frankfurt's DAX off 5.1 per cent.

Euro down more than 1%

In other financial developments Wednesday, the euro fell 1.14 per cent to $1.4212 US.

The Canadian dollar closed down 1.64 cents at 100.52 cents US after volatility on currency markets pushed the loonie slightly below parity for a short while Tuesday.

The dollar is down sharply from a recent high of just over 106 cents at the end of last month as investors flocked to the safety of U.S. treasuries and gold.

Crude oil prices charged ahead, closing up $3.59 US to $82.89  a barrel after worries about slowing demand pushed prices down 20 per cent from a recent high of almost $100 US on July 26.

Earlier in Asia, the Shanghai composite index rose 0.9 per cent and the smaller Shenzhen composite index gained 1.4 per cent. Indexes in Taiwan and India also gained. Hong Kong's Hang Seng jumped 2.3 per cent.

Japan's Nikkei 225 index climbed 1.1 per cent.

With files from The Associated Press and The Canadian Press