The S&P/TSX composite index started off positive but ended the session down 25.77 points to 12,232.83, dragged down by lower gold stocks. The TSX Venture Exchange dipped 1.21 points to 1,537.72.
The Canadian dollar was up 0.27 of a cent to 98.5 cents US after the Bank of Canada announced it was leaving its key rate unchanged at one per cent.
The bank observed that the Canadian economy did better than expected in the last half of 2011, but it anticipates the pace of growth going forward to be more modest than previously forecast, largely due to deteriorating economic performance outside of Canada.
U.S. markets were positive but also closed below session highs with the Dow industrial ahead 60.01 points to 12,482.07. The Nasdaq composite index gained 17.41 points to 2,728.08 and the S&P 500 index rose 4.58 points to 1,293.67.
China reported its economy grew 8.9 per cent in the final quarter of last year, down from 9.1 per cent in the third quarter and the slowest in 2 1/2 years. But markets had been expecting growth to come in at a lower reading of 8.7 per cent while the data also showed that December retail sales and factory output both accelerated.
The Chinese government moved to slow its economy last year to deal with high inflation, although officials have recently started easing lending to encourage growth in the face of plunging export demand from the U.S. and Europe.
But analysts cautioned that expectations for a quick loosening of lending requirements could be premature.
"I do sense that maybe the market is putting in too many expectations that they will loosen lending quickly," said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier.
"If I were in their shoes, I wouldn’t want to loosen quickly and have another real estate bubble."
There had been worries that Beijing would be unable to engineer a soft landing for China's economy.
A China's growth has been an important source of support for a struggling global economy and, in particular, has boosted prices for oil and metals and in turn energy and mining stocks on the resource-heavy TSX.
A major gainer on the TSX was Research In Motion (TSX:RIM). Its shares jumped 90 cents or 5.34 per cent to $17.76 amid a report from The Boy Genius Report blog, which closely follows RIM. It said South Korean electronics giant Samsung is the frontrunner among possible bidders for assets of the company.
Kinross Gold Corp. (TSX:K) was one of the biggest decliners. Its shares tumbled $2.81 or 21.29 per cent to $10.39 after it said soaring costs at the Tasiast mine in Africa will require months of delay. It will also result in a writedown of at least some of the goodwill related to the company's US$7.1-billion purchase of Red Back Mining in 2010.
Overall, the gold sector was the weakest component, down about 2.5 per cent even while February gold bullion climbed $24.80 to US$1,655.60 an ounce. Barrick Gold Corp. (TSX:ABX) lost $1.03 to C$48.75.
The Chinese data sent other commodity prices up sharply with the February crude contract on the New York Mercantile Exchange up $2.01 to US$100.71 a barrel.
Meanwhile, natural gas prices declined 6.8 per cent to hit a 10-year low of US$2.49 per 1,000 cubic feet on the New York Mercantile Exchange.
The energy sector edged up 0.45 per cent while Suncor Energy (TSX:SU) was up 28 cents to C$33.22 while Cenovus Energy (TSX:CVE) gained $1.49 to $35.06.
The base metals sector gained 0.64 per cent as March copper gained nine cents to US$3.73 a pound. China is the biggest consumer of the metal. Teck Resources (TSX:TCK.B) climbed cents to C$ while First Quantum Minerals (TSX:FM) advanced $1.10 to $23.91.
The financials group was down slightly as U.S. banking giant Citigroup missed Wall Street expectations. Earnings came in at US$1.16 billion or 38 cents a share, far short of expectations of 54 cents. Citigroup shares fell $2.49 or 8.1 per cent to US$28.25.
On the TSX, Royal Bank (TSX:RY) gave back 26 cents to C$51.82.
In other corporate news, commercial property owner Dundee Real Estate Investment Trust (TSX:D.UN) is buying Whiterock REIT (TSX:WRK.UN) in a transaction valued at $582.1 million. The move combines two of Canada's most prominent commercial and industry property owners, giving shareholders either $16.25 in cash or 0.4729 Dundee REIT units. Dundee units fell $1.14 to $33.93 while Whiterock jumped $1.78 or 12.45 per cent to $16.08.
Valeant Pharmaceuticals (TSX:VRX) is sweetening its hostile bid for Irvine, Calif.,-based ISTA Pharmaceuticals Inc. Valeant's new offer raises its earlier bid by a dollar to US$7.50 per share. And the Mississauga, Ont.,-based pharmaceutical company says it might pay even more, up to US$8.50 a share, if ISTA agrees to a week-long period of due diligence. Valeant stock improved by 86 cents to $51.82.