Fresh elections for the debt-plagued country will be held next month, raising the possibility that a new government could repudiate the agreements that have enabled Athens to keep afloat through massive bailouts.
The S&P/TSX composite index tumbled 145.48 points to 11,343.05 while the TSX Venture Exchange retreated 63.76 points to 1,240.07.
The prospect of another vote has raised fears that Greece may walk away from its debts, meaning a likely exit from the euro currency. No one really knows what kind of fallout those issues would have for the wider global economy.
Resource stocks took the brunt of the downturn as prospects for worsening economic conditions left commodity prices at or near 2012 lows.
"The commodity sectors of our market have really taken it on the chin," said Fred Ketchen, manager of equity trading at Scotia Capital, who noted that the metals and gold sectors have plunged more than 20 per cent this year while the energy sector has fallen by more than 12 per cent.
Attempts to form a coalition government in Greece have failed since an inconclusive election May 6.
Greek socialist leader Evangelos Venizelos said Tuesday that Greece is going to new elections after talks produced no deal.
Although no party won enough seats in Greece's recent election to form a government, voters gave support to political parties that want to cancel or renegotiate the terms of a massive financial bailout by international lenders that requires harsh austerity measures.
"I’m not sure they really have a handle on what it is they’re doing or what they need to do or what they want to do," added Ketchen.
"If they have another election, what will that prove? it may prove exactly what they did last time."
Some investors fear other weak euro countries such as Portugal or Ireland could eventually take the same path.
The Canadian dollar lost 0.39 of a cent to 99.32 cents US. The loonie has been pressure over the past week as traders avoided riskier assets such as oil and metals and resource-based currencies, including the loonie.
American markets were also lower amid data showing U.S. retail sales rose 0.1 per cent in April, which met expectations. Other data showed that U.S. consumer prices were flat in April as lower gas prices offset higher food and housing costs.
The Dow Jones industrials dropped 63.35 points to 12,632.
The Nasdaq composite index was 8.82 points lower to 2,893.76 and the S&P 500 index fell 7.69 points to 1,330.66.
The fresh round of worries about Greece has left the TSX at its lowest level since early October. The main index is now down more than five per cent below where it started the year. It has tumbled 11 per cent since its 2012 highs racked up in late February.
The higher U.S. currency also impacted commodity prices. That is because these prices are denominated in U.S. dollars and a higher greenback makes oil and metals more expensive for holders of other currencies.
The energy sector was off 1.85 per cent as the June crude contract on the New York Mercantile Exchange slipped 80 cents to US$93.98 a barrel after closing Monday at its lowest level since just before Christmas. Cenovus Energy (TSX:CVE) gave back 33 cents to C$31.77 while Canadian Natural Resources (TSX:CNQ) declined 81 cents to $29.44.
The gold sector was down about 3.6 per cent as bullion ticked $3.90 lower to US$1,557.10 an ounce, its lowest close since late December. Barrick Gold (TSX:ABX) faded C$1.42 to $35.23 while Iamgold (TSX:IMG) dropped 56 cents to $9.48.
The base metals sector slipped 3.7 per cent as copper extended a string of losses that have taken the metal to its lowest level since mid-January.
The July contract dipped four cents to US$3.52 a pound on Tuesday. Copper is viewed as an economic bellwether as it is used in so many industries. But prices have fallen sharply — down over seven per cent since May 1 alone — amid data showing a slowing global economy. Teck Resources (TSX:TCK.B) was down $1.30 to C$30.40 and Ivanhoe Mines (TSX:IVN) was down 44 cents to $8.75.
Financials were weak with insurers bearing the brunt of damage with Manulife Financial (TSX:MFC) down 36 cents to $11.64 while TD Bank (TSX:TD) fell 80 cents to $79.13.
The tech sector also weighed with shares in Research In Motion Ltd. (TSX:RIM) down 67 cents to $11.18. The stock slid as research from Kantar WorldPanel indicated that Google's Android smartphone software stretched its market lead in early 2012 at the expense of rivals like RIM and Nokia.
There had been some optimism in the marketplace Tuesday morning after data showed that a strong export performance by Germany helped the economy of the 17 countries that use the euro to avoid a recession, if only narrowly, in the first three months of the year.
In corporate news, Facebook is raising the price at which it plans to sell stock to the public. The social networking company said in a regulatory filing Tuesday that it expects to sell its stock for between US$34 and $38 per share. That’s higher than a previous range of $28 to $35. The initial public offering is expected to happen Friday.
Shares in The Home Depot Inc. slumped 2.43 per cent to US$48.67 after full-year revenue guidance from the world’s biggest home-improvement company fell short of Wall Street expectations.
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