The S&P/TSX composite index declined 13.85 points to 12,076.03, as investors sold off mining and financial stocks and bought into defensive sectors such as consumer and telecom stocks. The TSX Venture Exchange lost 4.07 points to 1,229.34.
The commodity-sensitive Canadian dollar was 0.07 of a cent higher to 101.17 cents US.
U.S. indexes were in the red, with the Dow Jones industrials down 3.56 points to 13,271.64.
The Nasdaq composite index slipped 0.38 of a point at 3,076.21 and the S&P 500 index inched 0.03 of a point lower to 1,418.13.
Markets have rallied this month after European Central Bank president Mario Draghi said that the ECB would do whatever it takes to keep the eurozone monetary union intact.
That has been taken to mean that the ECB could ramp up its purchases of government bonds to lower the high interest yields faced by some governments.
But that commitment was thrown into doubt Monday after Germany’s central bank, the Bundesbank, again stressed its skepticism toward those proposed purchases, despite signs Chancellor Angela Merkel is open to the ECB's plans. The German national central bank said in its monthly report Monday that such purchases would carry "substantial risks."
High borrowing costs on government bonds are threatening to ruin the finances of Spain and Italy. Bond purchases could drive down those costs, though an earlier, limited ECB bond purchase program failed to decisively lower them.
"We’re getting some mixed signals coming out of Europe again," said Allan Small, senior adviser at DWM Securities.
"I think the market is learning to digest this and take it with a grain of salt. Once upon a time if we heard mixed signals coming out of Europe, we would be down triple digits. Everyone is kind of, enough is enough."
In another development, German news magazine der Spiegel reported that the ECB was contemplating setting concrete yield caps above which it would intervene to drive borrowing rates down.
However, the ECB said in a statement that it was "wrong" to speculate on the shape of future ECB interventions. It said its policies remained independent of governments and that it would act "strictly" within its mandate, which stresses preserving price stability as the first priority.
The base metals sector led decliners, down about 0.73 per cent as copper prices gave back last week's three-cent gain, with the September contract in New York off five cents at US$3.37 a pound. First Quantum Minerals (TSX:FM) gave back 42 cents to $19.37 and Taseko Mines (TSX:TKO) was off four cents to $2.61.
Copper fell as hopes dimmed of further stimulus from Chinese policy-makers. A report over the weekend that property prices in July rose slightly discouraged investors who have been hoping for further big stimulus measures from the Chinese government.
China is the world’s biggest consumer of copper, viewed as an economic bellwether as it is used in so many industries.
Energy stocks also gave up ground as oil prices reversed early gains, with the September contract on the New York Mercantile Exchange down four cents to US$95.97 a barrel. Suncor Energy (TSX:SU) fell 23 cents to $32.20.
Elsewhere in the sector, FMC Technologies Inc. announced plans to acquire Calgary-based oilfield services company Pure Energy Services Ltd. (TSX:PSV) for $282 million. Pure's stock gained about 40 per cent after the announcement, rising to $10.97 — just short of FMC’s offer of $11 per share in cash.
Financials were negative with TD Bank (TSX:TD) down 52 cents to $80.72.
Tech stocks also weakened as Research In Motion Ltd. (TSX:RIM) shed 13 cents to $7.26.
The gold sector was positive while December bullion gained $3.60 to US$1,623 an ounce. Barrick Gold Corp. (TSX:ABX) gained 41 cents to $36.01.
Other TSX gainers included Shoppers Drug Mart (TSX:SC) rose 45 cents to $42.91 and Telus Corp. (TSX:T) was up 47 cents to $64.27.
Franco-Nevada Corp. (TSX:FNV) has agreed to commit $1 billion toward paying for the cost of a major copper mining project being led by Inmet Mining Corp. (TSX:IMN). Inmet owns 80 per cent of the Cobre Panama project and the remainder is owned by Korea Panama Mining Corp. Franco Nevada was down 13 cents to $48.95 while Inmet declined 39 cents at $44.43.
In other corporate news, DHX Media Ltd. shares surged 23.68 per cent to $1.41 as it said it is spending $111 million to acquire Cookie Jar Entertainment to create what it says will be Canada’s largest children’s entertainment company, with shows like Caillou and Inspector Gadget.
Shares in U.S. home improvement chain Lowe's fell 5.78 per cent to $26.26 as it said its fiscal second-quarter net income dropped 10 per cent to US$747 million or 64 cents a share. Lowe's also lowered its fiscal 2012 earnings and revenue outlooks on Monday.
Lowe's has said it would like to acquire Rona Inc. (TSX:RON), Canada's largest home-improvement retail chain, but its $1.76-billion offer has been rejected by the company and also faces opposition from the province of Quebec.
Apple is the world's most valuable company ever, amid optimism around what is believed to be the impending launch of the iPhone 5, and possibly a smaller, cheaper iPad. Its surging stock propelled the company’s value to $621 billion, beating the record for market capitalization set by Microsoft Corp. in the days of the Internet boom. Its stock closed up 2.62 per cent to US$665.15.
And Facebook stock fell below US$19 — half its initial public offering price — for the first time. That came after Thursday’s expiration of a lock-up period, which has provided early investors and insiders with an opportunity to exit. Its shares moved as low as $18.75, before rising five per cent from Friday's close to $20.01.