New worries about European debt sent Canada's largest stock exchange lower on Monday, as investors digested the increasing likelihood of a Greek default.
The S&P/TSX Composite Index lost 179 points to trade at 11,444. That's a drop of roughly 1.5 per cent.
Worries about Greece came to the fore after the government said the country's economy will remain in recession next year, causing it to miss its original deficit reduction targets.
A draft of the country's 2012 budget says Greece's debts are projected to reach 172.7 per cent of gross domestic product in 2012 while the deficit will drop to 6.8 per cent. That's an improvement, but still higher than the 6.5 per cent originally agreed with international bailout creditors.
Debt inspectors from the International Monetary Fund, European Central Bank and European Commission, known as the troika, are in Athens reviewing reforms to see if Greece qualifies to receive the next €8 billion instalment of its bailout. Without it, Greece will run out of funds in mid-October.
A default would have serious repercussions for the European banking system and likely derail what is already a fragile economic recovery and send it into recession.
A recession would lower demand for oil, copper and other resources Canada produces. That would weaken exports and squeeze profits in Corporate Canada — eroding a main driver of share prices on the resource-heavy TSX.
The loonie seesawed in the early going, but was unchanged at 95.39 cents US in the late morning.
The Dow Jones Industrial Average was down 69 points to 10,842. Oil lost $1.47 to trade at $77.72 a barrel in New York.
Gold was buoyed by the bad news, with the price of an ounce of billion increasing $28 to $1,650 US. Gold tends to perform well during times of market turbulence and uncertainty.
