Source: The Canadian Press

The Toronto stock market moved lower Friday amid concern that deep spending cuts by European countries dealing with high debt will slow the global economic rebound.

The S&P/TSX composite index fell 101.62 to 12,014.97, well off early lows, partly because of gains in the gold sector, while the TSX Venture Exchange lost 16.6 points to 1,593.11.

“I think the main message we’re getting in recent days is Europe, as an issue, is not going away that easily for the markets,” said Doug Porter, deputy chief economist at BMO Capital Markets.

“While we may have dodged the bullet of an outright (government debt) crisis that we seemed to be flirting with last week, the bigger picture of just the underlying enormity of their budget deficits and government debts is an issue that’s going to nag at the markets for quite some time.”

Markets had risen sharply earlier in the week after a rescue package worth nearly US$1 trillion was launched by the European Union and International Monetary Fund to try and contain mounting debt problems.

That alleviated short-term concerns about Greece defaulting on its debt but the bailout still requires significant cost-cutting in some countries, supporting the perception that commodity demand will weaken in Europe and undermine strength in the metals and oil heavy TSX.

Currency traders continued to move out of the euro because of concerns that strict austerity measures in countries like Greece, Spain and Portugal will slow the continent’s economy to a crawl in coming years.

Investors moved into the perceived safe haven of the U.S. dollar, which pushed the euro down to US$1.2357, its lowest level since October 2008, as investors worry about the potential disintegration of the currency.

Also increasing selling pressure on the euro was a report in a Spanish newspaper that French President Nicolas Sarkozy threatened to pull his country out of the eurozone unless other members agreed to help Greece at a Brussels summit last week. Officials from France, Germany and Spain have denied the report.

The Canadian dollar fell 1.06 cents to 96.93 cents US.

The energy sector fell 1.72% as prices backed off amid demand concerns and a stronger U.S. dollar. The June crude contract on the New York Mercantile Exchange fell $2.79 to US$71.61 a barrel. On the TSX, Suncor Energy (TSX:SU) lost 78 cents to C$32.06, while Imperial Oil (TSX:IMO) declined 78 cents to C$41.51.

The base metals sector lost 3.32% as the July copper contract on the Nymex declined 10 cents to US$3.13 a pound. Teck Resources (TSX:TCK.B) shed $1.86 to C$35.34, while FNX Mining (TSX:FNX) gave back 71 cents to C$11.94.

Nervous investors had earlier pushed the price of gold higher, but by the close the June bullion contract in New York was down $1.40 to US$1,227.80 an ounce. Gold earlier hit a new intraday record high of US$1,249.70 as investors used it as a hedge against inflation and protection against deteriorating currencies like the euro. Still, TSX gold stocks headed higher, with Barrick Gold Corp. (TSX:ABX) gaining $1.32 to C$47.08 and Yamana Gold Inc. (TSX:YRI) ahead 20 cents at C$11.79.

Financials were also a major decliner, down 1.26% with TD Bank (TSX:TD) falling $1.10 to C$73.39 and Royal Bank (TSX:RY) down 66 cents at $59.98.

Transportation stocks helped drive the industrial sector 1.67% lower as Bombardier Inc. (TSX:BBD.B) declined 11 cents to $5.39, while Canadian Pacific Railway (TSX:CP) dropped $1.79 to $59.16.

In a measure of investor unrest, a widely watched stock market fear gauge, the CBOE Volatility Index, jumped about 18% Friday.

On the economic front, Canadian manufacturing sales advanced 1.2% to $44.5 billion in March, with food and motor vehicle manufacturers the largest contributors to the gains.

New York markets also retreated despite data showing that U.S. retail sales rose 0.4% last month, better than the 0.2% increase economists had expected but far below the 2.1% surge in March. Excluding autos, retail sales were up 0.4%, which matched expectations.

New York’s Dow Jones industrial average lost 162.79 points to 10,620.16, the Nasdaq composite index lost 47.51 points to 2,346.85 and the S&P 500 was down 21.76 points at 1,135.68.

Toronto and New York indexes finished higher for the week after sustaining sharp losses previous week before the massive aid plan was announced. The TSX gained 2.75% after the previous week’s 4.24% slide, while the Dow advanced 2.31%, making up a chunk the previous week’s 5.7% drop.