TORONTO (Reuters) - Toronto's main stock index hit its lowest level since November on Tuesday after a U.S. deal to avoid a government debt default failed to distract investors from recent dismal economic data.
Battered financial and energy shares, both down more than 2 percent, led the decline after a succession of bearish U.S. data releases since last week sent investors fleeing to safer havens, including gold, which surged to its ninth record high this year.
Suncor Energy was the most heavily weighted decliner on the index, down 3.7 percent at C$35.28, followed by Bank of Nova Scotia , off 3 percent at C$52.54.
The retreat came on the heels of tepid U.S. and global manufacturing data on Monday, when most Canadian markets were closed for provincial holidays, and very disappointing U.S. GDP figures last Friday.
In economic data on Tuesday, U.S. consumer spending dropped in June for the first time in nearly two years and incomes barely rose, signs the economy lacked momentum as the second quarter drew to a close.
"The whole U.S. debt ceiling issue had transfixed the markets, but unfortunately the focus is now turning to the lack of strength in the U.S. economy," said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver.
The United States stepped back from the brink of default on Tuesday but congressional approval of a last-gasp deficit-cutting plan did not dispel fears of a credit downgrade and future feuds over taxes and spending.
The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> ended down 193.31 points, or 1.49 percent, at 12,752.32.
Right before the close, the index hit its weakest level since November 18. Picardo said significant support around 12,500, a level not seen since last November, was now in play.
Nine of the index's 10 main groups were lower with gold-mining shares the one bright spot. Barrick Gold Corp led the gainers, rising 2.4 percent to C$46.65.
The next major data point to watch will be monthly U.S. employment numbers on Friday.
"We need an exceptional employment number to snap us out of this funk," Picardo said. He noted, however, that even a mild rise in the U.S. jobs numbers could have some positive impact on markets.
"The market is bracing itself for disappointment and if the numbers come to be anything less than disastrous, it's quite possible that we might get a rally."
Looking to the rest of the summer, catalysts to drive markets out of their recent slump may be few.
"The biggest risk that you have is the summer slowdown can accelerate in August," said Paul Hand, managing director at RBC Capital Markets. "Whether it's the high yield market in the U.S. or Europe taking August off."