TORONTO - The Toronto stock market was negative Wednesday as nervousness about the American economy returned after data showed surprising weakness in a widely-watched regional economic gauge.
At the same time, markets coped with another round of anxiety over the Greek debt crisis, which pushed the U.S. dollar higher and oil prices lower.
The S&P/TSX composite index fell 66.87 points to 13,030.95 while the TSX Venture Exchange added 0.48 of a point to 1,945.69.
A day after a better than expected retail sales report sent North American markets surging, investors were dismayed with data showing that manufacturing activity deteriorated sharply in the New York region in June.
The Empire State manufacturing survey index released by the New York Federal Reserve fell below zero to minus-7.8 in June from 11.9 in May. This is the first time the index has been below zero since last November. Economists had expected the index to rebound to 13.3 in June.
"The slump illustrates the extent of the economic slowdown," said Paul Ashworth, chief U.S. economist for Capital Economics in Toronto.
"The detail of the survey was just as disconcerting as the headline, with the new orders, shipments and employment indices all deteriorating sharply."
The Canadian dollar was down 0.28 of a cent to 102.93 cents US as data from Statistics Canada showed a slightly bigger than expected decline in manufacturing sales in April.
The agency said sales decreased 1.3 per cent to $46.7 billion with the transportation equipment sector accounting for most of the decline.
The U.S. currency advanced against the euro Wednesday after a meeting of euro-zone officials in Brussels on Tuesday didn't make progress on reaching an agreement for a potential second rescue package for Greece.
Moody's earlier warned of French banks' exposure to Greece. Investors worry that Greece will end up defaulting in some shape or form on its massive debts. That would leave a number of banks and financial institutions in peril, and not just in Greece.
The financial sector led TSX decliners, down one per cent with TD Bank (TSX:TD) down $1.04 to $78.54 and National Bank (TSX:NA) was 83 cents lower to $77.67.
The TSX energy was off early lows, down 0.55 per cent as oil prices turned around.
The July crude contract on the New York Mercantile Exchange rose 51 cents to US$99.88 a barrel as the Energy Information Administration said Wednesday that crude inventories fell 3.4 million barrels last week while analysts had predicted a drop of 1.9 million barrels.
At the same time, it said that inventories of gasoline rose 600,000 barrels last week against an expected 1.3 million-barrel rise.
Suncor Energy (TSX:SU) lost 34 cents to $38.05 a day after the energy giant said it won't return to Libya while Moammar Gadhafi remains in power. Suncor head Rick George said the company may announce a writedown as early as next month as a result of the Libyan situation, but no decision has been made.
Talisman Energy (TSX:TLM) declined 11 cents to $19.04.
The base metals sector was down 1.1 per cent with the July copper contract unchanged at US$4.15 a pound after surging 12 cents on Tuesday. Taseko Mines (TSX:TKO) declined 14 cents to $4.33 while Inmet Mining (TSX:IMN) gave back $1.69 to $65.02.
Investors also took in some major acquisition activity in the mining sector. Belgium's Nyrstar NV is making a friendly takeover bid for Canada's Breakwater Resources Ltd. (TSX:BWR) in a deal is worth about $663 million, based on $7 per share.
Breakwater shares surged $2.22 or 42.7 per cent to $7.42.
The gold sector was the only positive group as investors looking for safety sent the August gold contract up $8.10 to US$1,532.50 an ounce. Goldcorp Inc. (TSX:G) advanced 88 cents to $46.46 while Kinross Gold Corp. (TSX:K) gained 21 cents to $15.15.
The TSX ran up 158 points Tuesday and the Dow Industrials 123 points after data showed U.S. retail sales in May declined 0.2 per cent, against the 0.7 per cent slide that economists expected.
The report was good news to investors who have been discouraged by a string of reports recently highlighting a deteriorating U.S. economy. But analysts doubted this one bit of good news was enough to turn around market sentiment.
"Today is a new day and the problems haven't gone away," said Chris Kuflik, ScotiaMcLeod wealth adviser in Montreal.
"You may be in the bearish camp, you may be in the bullish camp or somewhere in between but there's not a lot of conviction in this market because there are a lot of question marks right now."
The Toronto market is still down almost nine per cent from the 2011 highs reached in early March.
New York markets were sharply lower with the Dow Jones industrials down 82.84 points to 11,993.27.
The Nasdaq composite index dropped 19.14 points to 2,659.58 while the S&P 500 index fell 9.43 points to 1,278.44.
Earlier in Asia, Japan's Nikkei 225 stock average closed up 0.3 per cent and South Korea's Kospi rose 0.5 per cent but other markets fell on expectations that China's central bank will go ahead with at least one more interest rate hike this month or next to deal with high inflation, particularly surging food prices.
Hong Kong's Hang Seng dropped 0.7 per cent while the Shanghai Composite Index lost 0.9 per cent.
European markets were negative with London's FTSE 100 index down 0.75 per cent, Frankfurt's DAX fell 1.05 per cent and the Paris CAC 40 declined 1.42 per cent.
