December 12, 2011 / 10:23 PM / in 6 years

TSX hits December low on Europe debt fears

TORONTO (Reuters) - Stocks fell to their lowest point since the end of November on Monday as mining and energy issues slid along with declining optimism that last week’s European Union deal would solve the region’s financial crisis.

On Friday, all EU countries except Britain agreed to implement stricter budget rules and to provide up to 200 billion euros in bilateral loans to the International Monetary Fund to help tackle the crisis.

Many investors had hoped, in vain, that the deal would include plans by the European Central Bank to significantly increase its bond buying program to push down lending costs and help avoid a new recession in the euro zone.

“Part of this is trying to enforce the discipline of the market and getting people to do the thing that they should do and using the threat of the sloppy market to get them there,” said Paul Hand, managing director at RBC Capital Markets. “And eventually, hopefully (they) do use the ECB.”

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE ended down 126.86 points, or 1.1 percent, at 11,907.89, it’s lowest close since November 29.

Eight of the index’s 10 main sectors were negative, led by the heavily weighted materials sector, which fell 2.5 percent.

Miners Barrick Gold (ABX.TO), which fell 2.9 percent to C$49.23, and Goldcorp (G.TO), down 3.3 percent to C$49.52, led the sector’s decline.

Bullion had its biggest one-day fall in nearly three months, sliding almost 3 percent as a lack of confidence in Europe pushed investors into the relative safety of the U.S. dollar.

The subindex of base metals miners dropped nearly 3 percent on lower copper prices.

The downbeat view on Europe’s economy more than offset upbeat data from top resource consumer China, where imports of copper, used in power and construction, reached their highest level since March 2010.

“Europe is very important to China and if their economy slows that has a direct effect on the Chinese economy,” said John Kinsey, portfolio manager at Caldwell Securities Ltd.

Diversified miner Teck Resources TCKb.TO was among the biggest losers, falling 2.3 percent to C$37.05.

The muddied European outlook hit Canadian energy shares, which fell close to 2 percent as oil prices slid on concerns that intensified austerity measures in Europe would lead to an economic slowdown and decreased demand.

Suncor Energy was the sector’s biggest laggard, sliding 2.7 percent to C$29.06.

Suncor shares were also hit by a downgrade from Canadian Imperial Bank of Commerce after Canada’s biggest oil and gas company said on Sunday it was withdrawing from a $1.2 billion Syrian gas project as a result of EU sanctions implemented earlier this month.

Financial stocks also dipped on fears of possible euro zone debt downgrades, led by the Royal Bank of Canada (RY.TO), which fell 1.8 percent to C$48.57.

Sun Life Financial (SLF.TO) shares jumped 8.4 percent to C$19.86 after Canada’s No. 3 insurer said it will stop marketing variable annuity and individual life insurance products in the United States to focus on building up its U.S. group insurance and employee benefits business.

($1=$1.03 Canadian)

Editing by Jeffrey Hodgson

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