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The close: Markets drop after more bad news out of Europe

Germany's Chancellor Angela Merkel, left, talks to Italy's Prime Minister Mario Monti during a European Union leaders summit in Brussels, June 29, 2012.

François Lenoir/Reuters

Worries over a possible downgrade to Germany's triple-A credit rating and the U.S. corporate earnings outlook conspired to drive stocks lower in Tuesday trading.

The S&P/TSX composite index fell 79 points or .68 per cent to 11,467, with weakness in financial stocks, utilities, and information technology companies.

In New York, the Dow Jones industrial average sagged 104 points or .82 per cent to 12,617, its third day of triple-digit declines.

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"Eurozone woes continue to weigh on equity markets," said Michael Hewson, senior market analyst at CMC Markets in London.

Credit rating firm Moody's said late Monday that it was putting Germany, Luxembourg and the Netherlands under review for possible downgrades, unnerving investors because it signals possible weaknesses in countries that have been viewed as Europe's strongest economies.

Worst hit in Europe were Italian and Spanish stocks, which fell 2.7 per cent and 3.6 per cent respectively, as investors resumed selling after a short respite on Monday following a decision of a short selling ban on the two markets. German stocks closed with a loss of .45 per cent.

Investors ignored a better-than-expected purchasing managers' survey by HSBC out of China, indicating that the Asian powerhouse's economy isn't slipping into a hard landing.

Turning to individual companies, in Toronto, Rogers Communications Inc. soared 5 per cent after the cable giant reported second-quarter results that exceeded expectations.

Nexen Inc. continued to rally after a sharp advance of more than 50 per cent on Monday, adding another .27 per cent, as investors bet that a bid for the company by China National Offshore Oil Corp. will succeed.

Some gold shares rallied as the price of the yellow metal posted a gain of $5 (U.S.) an ounce in late trading to $1,582 an ounce.

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Osisko Mines paced gainers with an advance of 4.2 per cent. Agnico Eagle closed 3.1 per cent higher and Goldcorp Inc. gained 0.6 per cent

With worries over Europe, banks trended lower. The Royal Bank of Canada fell 1.4 per cent, the National Bank of Canada 1.5 per cent and Toronto-Dominion Bank .78 per cent. In the insurance sector, Sun Life Financial Inc. lost 2.7 per cent.

In the United States, investors pounded United Parcel Service Inc. to a closing loss of 4.6 per cent after the global deliver giant reported quarterly earnings and revenue that were below forecasts.

UPS is often considered a bellwether because its parcel delivery operations are sensitive to global economic conditions.

Cisco Systems Inc. sagged 5.9 per cent follow an announcement that the telecommunications equipment maker was shedding 2 per cent of its work force.

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About the Author
Investment Reporter

Martin Mittelstaedt has had a varied reporting career at the Globe and Mail, covering politics, the environment and business. He opened up the Globe's New York bureau for the Report on Business, and has also been on the banking and capital markets beats. He's written extensively on investing themes. More

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