07/18/2011 11:26 EDT | Updated 09/17/2011 05:12 EDT

TSX Dips While Gold Stocks Rise Amid European, U.S. Debt Worries

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THE CANADIAN PRESS — TORONTO - The Toronto stock market was lower Monday but losses were held in check by rising gold stocks as the precious metal moved further into record territory amid concerns about European and U.S. government debt.

The S&P/TSX composite index was 42.38 points lower to 13,257.15 with most sectors in the red while the TSX Venture Exchange rose 5.62 points to 2,012.99.

The U.S. dollar was also attractive for investors looking for a safe haven and the Canadian dollar lost 0.59 of a cent to 104.2 cents US.

The negative tone on markets follows the release of stress tests conducted on European banks.

On Friday, the European Banking Authority said only eight of the 90 EU banks it assessed failed.

But the prevailing view in the markets is that the tests didn’t give a true picture of the banks’ health since they didn’t model what would happen if a eurozone country defaulted on its debt. Analysts thought that was particularly surprising given concerns that Greece may be forced to do exactly that.

Meanwhile, the yields, or interest rates, on Italian and Spanish bonds rose again Monday. That means investors are asking for higher and higher premiums to lend them money — a sign they consider the countries an increasingly bad risk.

At the same time, there was growing unease over the failure of American lawmakers to agree on conditions for raising the U.S. debt limit by an Aug. 2 deadline.

The August gold contract in New York was ahead $9.80 to US$1,599.90 an ounce after earlier going as high as US$1,603.80. The gold sector rose 2.11 per cent as Goldcorp Inc. (TSX:G) ran ahead $1.04 to C$52.63 while Barrick Gold (TSX:ABX) climbed 95 cents to C$47.06.

Carpathian Gold Inc. (TSX:CPN) said Barrick Gold will take a nine per cent stake, or 38.5 million shares in the gold development company for $20 million. Its shares rose two cents to 60 cents.

Financials led decliners, down almost one per cent with Scotiabank (TSX:BNX) down 77 cents to $56.26 and Royal Bank (TSX:RY) fell 54 cents to $52.51.

Manulife Financial Corp. (TSX:MFC) shares were 29 cents lower to $15.70 after the insurer announced it is selling its Life Retrocession reinsurance business to Pacific Life Insurance Co. for an after-tax gain of $275 million.

The higher American currency punished oil prices with the August contract on the Nymex down $1.86 to US$95.38 a barrel.

A stronger greenback usually helps depress oil prices, which are denominated in dollars, as it makes oil more expensive for holders of other currencies.

The energy sector backed off 0.81 per cent as Canadian Natural Resources (TSX:CNQ) fell 57 cents to C$39.20.

Elsewhere in the energy sector, Shell Canada Energy said Friday it is selling its stake in the long-stalled Mackenzie pipeline project in the Northwest Territories, along with other assets in the region. If built, the Mackenzie pipeline would connect natural gas from near the coast of the Beaufort Sea in the Northwest Territories to northwestern Alberta, where it would link up with TransCanada Corp.'s (TSX:TRP) vast network. Imperial Oil Ltd. (TSX:IMO) is the lead partner on the project and its shares were down 43 cents to C$43.80.

The base metals sector declined 0.64 per cent as copper prices dipped three cents at $4.38 a pound. First Quantum (TSX:FM) dropped $2.47 to C$132.53.

Industrial stocks also dragged with Bombardier Inc. (TSX:BBD.B) down 27 cents to $6.11.

New York's Dow Jones industrial average fell 135.02 points to 12,344.71.

The Nasdaq composite index was down 33.1 points to 2,756.7 while the S&P 500 index gave back 13.88 points to 1,302.26.

On the earnings front, Hasbro said strong demand for its toys like Transformers action figures and its Beyblade spin-top game helped its second-quarter profit jump 33 per cent to US$58.1 million or 42 cents a share, or 33 cents excluding one-time items.

That was six cents below estimates and its shares slipped $1.23 to US$40.14.

Oil services company Halliburton Co. says the expansion of oil and natural gas drilling in North America helped boosted company earnings by nearly 54 per cent in the second quarter to US$739 million or 80 cents a share. That was seven cents above expectations and its shares gained 29 cents to US$53.37.

Earlier in Asia, South Korea’s Kospi slipped 0.7 per cent, Hong Kong’s Hang Seng fell 0.3 per cent and Australia’s S&P/ASX 200 shed less than 0.1 per cent.

The Shanghai Composite Index lost 0.1 per cent and the Shenzhen Composite Index dropped less than 0.1 per cent.

London's FTSE 100 index lost 1.15 per cent, Frankfurt's DAX was down 1.16 per cent while the Paris CAC 40 dropped 1.99 per cent.

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