Source: The Canadian Press

The Toronto stock market closed lower Thursday as gold stocks faded alongside bullion prices that fell from record highs while financials wilted amid news that more American banks are under investigation.

The S&P/TSX composite index slipped 79.38 points to 12,116.59 following three days of sharp gains netted on relief that the European Union was making almost US$1 trillion available to staunch a government debt crisis.

The TSX Venture Exchange dropped 16.02 points to 1,609.71.

The Canadian dollar slipped 0.07 of a cent to 97.99 cents US.

Financials led the TSX losses amid a report that New York’s attorney general has launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities. A source said that Attorney General Andrew Cuomo is trying to figure out if banks provided the agencies with false information in order to get better ratings on the risky securities.

Royal Bank (TSX:RY) was down 49 cents at $60.64.

Sun Life Financial Inc. (TSX:SLF) shares were down 37 cents to $30.59 after it said Thursday that it is setting up a stand-alone mutual fund company. Canada’s third-largest life insurance company said it will bring a series of new funds to Canada to expand its wealth management services.

Gold stocks were weak as a rising U.S. dollar and profit-taking pushed the June bullion contract on the New York Mercantile Exchange down $13.90 to US$1,229.20 an ounce. Worries about the future of the euro had pushed gold to a record high of US$1,249.20 an ounce in intraday trading Wednesday.

Signs of weak economic growth across Europe have pushed the euro to a new 14-month low against the U.S. dollar as investors remain unsure if countries like Greece and Spain, both of which are dealing with huge debt levels, will be able to cut spending and still grow. The euro has lost about 12% of its value against the greenback since the beginning of the year.

“I think it’s a low-growth sort of scenario where they’ve had a debt-fuelled EU and German-funded expansion throughout the Mediterranean countries that is coming to an end,” said Chris King, portfolio manager at Morgan, Meighen and Associates.

“But the low euro really helps exports, doesn’t it?”

On Thursday, the euro traded at around US$1.2535 after spiking to US$1.3048 on Monday after the eurzone loan package was announced.

The TSX Global Gold Index weakened with Kinross Gold (TSX:K) down 41 cents at C$19.25 while Barrick Gold Corp. (TSX:ABX) declined 79 cents to $45.76.

The energy sector shed 0.68% as the June crude contract on the Nymex fell $1.25 to US$74.40 a barrel after the U.S. Energy Information Administration said Wednesday that oil supplies increased more than expected last week.

Canadian Natural Resources (TSX:CNQ) backed away $1.07 to C$72.73, while Canadian Oil Sands Trust (TSX:COS.UN) was down 42 cents at C$28.83.

There was also some major dealmaking in the Canadian oilpatch. Penn West Energy Trust (TSX:PWT.UN) has entered into an agreement with a wholly-owned subsidiary of the China Investment Corp. to form a joint venture to develop the Canadian company’s bitumen assets in the Peace River area of northern Alberta.

CIC has also agreed to purchase 23.5 million units for about $435 million and will invest $817 million in the new joint venture. In TSX trading Thursday, Penn West units were up 74 cents at $20.19.

“It’s long-life resource assets in a politically stable country, so if you buy it you know that you will get to keep it,” Gavin Graham, global strategist at Excel Funds Management, said of the deal.

And he pointed out that Asian countries will likely make partnerships with other Canadian resource companies.

“You are going to see not merely the Chinese,” he said, referring to a deal that last October that saw South Korean energy company Korea National Oil Corp. acquire Harvest Energy Trust for $4.1 billion.

And earlier this month, Korea Gas Corp. said it was making a $565-million investment in two promising natural gas plays in northeastern British Columbia.

The base metals sector was flat as July copper gained four cents to US$3.23 a pound. First Quantum Minerals (TSX:GM) lost $2.33 to C$71.27 while FNX Mining (TSX:FNX) improved 65 cents to $12.65. The company reported a quarterly profit of $1.9-million, bouncing back from a loss a year earlier when it booked a writedown related to its investment in Gold Wheaton Gold Corp. (TSX:GLW).