Source: The Canadian Press

Stock markets finished lower Thursday in volatile trading as investors became increasingly convinced that an aid package for Greece won’t be enough to stop the European debt crisis from spreading.

The S&P/TSX composite index lost 32.7 points to 11,842.43, while New York’s Dow Jones industrials plunged 347.8 points to 10,520.32.

Losses were even steeper at mid-afternoon when investors briefly pushed the Dow down almost 1,000 points, while the Toronto market fell as much as 452 points before recovering.

Analysts had a tough time explaining the short, sharp plunges on markets.

“Market sentimentality is sometimes fickle and all of a sudden people decide that’s it,” said David Watt, senior currency analyst at RBC Capital Markets.

“Who knows? At mid-afternoon things certainly went hairy.”

Other analysts pointed to computer trading which intensified the losses as programs designed to sell stocks at a specified level kicked in. Traders use those programs to try to limit losses when the market is falling. And the selling only led to more selling as prices fell.

The TSX Venture Exchange was 34.46 points lower at 1,562.68.

Commodity stocks and currencies have suffered this week as investors lose faith in the euro and pile into the perceived safe haven of the U.S. dollar.

The Canadian dollar continued to lose ground after falling about two cents US over the previous two sessions. It tumbled another 2.09 cents Thursday to 95.03 cents US, its lowest close since Feb. 26, after going as low as 93.02 cents US at one point during the mid-afternoon plunge.

The euro continued to plumb 14-month lows, trading at US$1.2611, down from US$1.2824 late Wednesday.

Greek legislators on Thursday approved drastic austerity cuts needed to secure a US$144 billion aid package from the 15 other countries that use the euro and the International Monetary Fund. Athens needs access to an initial portion of the money by May 19 to cover US$11.6-billion in debt payments, or else it will likely default.

But even if Greece gets the money it needs, there are still worries that would be only a temporary fix to a growing debt problem across the continent, and other countries like Portugal and Spain will all eventually need similar rescues.

A perceived lack of action on the part of the European Central Bank also likely contributed to the day’s slide.

The ECB said Thursday it would leave its benchmark interest rate unchanged at 1%.

Investors looking for the ECB to provide reassurance were disappointed when the central bank said its governing council did not discuss buying government bonds in the markets as a way of easing the debt crisis engulfing the eurozone.

Bank president Jean-Claude Trichet also told a news conference Thursday that the governing council did not discuss the need to create an orderly default mechanism for the eurozone.

“We were expecting maybe a scintilla of heightened concern about what was going on and instead, the ECB seemed to be treating things as business as usual,” Watt said.

“You can understand to an extent. Maybe … amid the maelstrom of market volatility, he was trying to be a calming influence and the market didn’t buy it at all. People started to give up any vestige of wanting to hold onto risky securities.”

The base metals sector led decliners, down 3% as July copper fell three cents at US$3.12 a pound. Teck Resources (TSX:TCK.B) dropped 76 cents to C$36.68 while HudBay Minerals (TSX:HBM) moved down 55 cents to C$10.90.

The stronger greenback pushed the June crude contract on the New York Mercantile Exchange down $2.86 to US$77.11 a barrel, taking the energy sector down 1.4%. Imperial Oil (TSX:IMO) lost 40 cents to C$40.26, while Canadian Natural Resources (TSX:CNQ) fell $1.13 to C$72.70.

Crude has plunged from an 18-month high of US$87.15 a barrel on Monday as the escalating debt crisis in Europe undermined confidence in the euro. Commodities priced in dollars, such as oil, become more expensive for investors holding euros as the U.S. currency strengthens.

Rising gold stocks limited TSX losses as investors seeking a further safe area pushed June gold on the Nymex ahead $22.30 to US$1,197.30 an ounce. Barrick Gold Corp. (TSX:ABX) gained $1.99 to C$46.12, while Goldcorp Inc. (TSX:G) improved $1.92 to C$45.75.

Bank stocks were a drag on the TSX as investors fretted over what a sovereign debt default might do to the global financial system. Royal Bank (TSX:RY) lost $1.64 to $59.57 while Bank of Montreal (TSX:BMO) dropped $1.86 to $59.07.