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Markets struggle as worries grow about France
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CBC News- Stock markets struggled Wednesday amid worries that the global recovery is slowing and that Europe's debt crisis will spread to France.
In Toronto, the S&P/TSX composite index eked out an eight-point gain to 12,118 early in the afternoon, after being down almost 200 points earlier. Its rebound was helped by the shares of gold companies, which rose as bullion moved deeper into record high territory. The S&P/TSX gold index was up 3.7 per cent.
Investors looking for a safe haven briefly pushed the December contract on the New York Mercantile Exchange above $1,800 US an ounce. In the early afternoon it was at $1,781.40 US an ounce, up $38.40.
On Tuesday, the TSX had soared 438 points as investors snapped up stocks that were beaten down during a market rout that carved 10 per cent from the TSX over the previous six sessions.
Also Wednesday, Canada's Finance Minister, Jim Flaherty, said that while Canada was "feeling the effects" of volatility on the markets, its economy is "performing relatively well" and expected to be among the strongest in the G7.
In New York, the Dow Jones Industrial Average was down 347 points, or 3.1 per cent, to 10,893, the Nasdaq Composite was down 62, or 2.5 per cent, to 2,421 and the S&P 500 was lower by 34 points, or 2.9 per cent, to 1,139.
The fall came after North American markets staged their strongest one-day rally in two years. That rise came after the U.S. Federal Reserve promised to leave interest rates ultra-low until mid-2013.
"The rally was rather short-lived, it's now focusing on a loss of confidence," said Kathryn Delgreco, investment adviser at TD Waterhouse.
"This market is not trading on fundamentals, it's trading on fear."
Shares in French banks — the most exposed to Italian and other troubled European economies — dropped despite assurances from government officials and rating agencies that France's triple A credit rating is not under threat.
Traders also worried about what will happen to France's debt, which is 85 per cent of GDP, well above the euro zone's recommended 60 per cent.
French bank Societe Generale's shares closed down almost 15 per cent, while stock in BNP Paribas was off more than nine per cent and Credit Agricole fell almost 12 per cent.
President Nicolas Sarkozy cut short his vacation in the French Riviera Wednesday and promised to cut France's huge debts in response to rising concerns that the country's triple A debt rating could be cut.
Sarkozy summoned key government ministers for an emergency meeting after days of mounting warnings from analysts that the world's fifth-biggest economy can't afford to keep bailing out poorer European states.
Paris exchange down 5.5%
European markets closed lower, with the Paris CAC 40 down 5.5 per cent, London's FTSE 100 index lower by 3.1 per cent and Frankfurt's DAX off 5.1 per cent.
The euro fell 1.35 per cent to $1.4181 US.
The Canadian dollar was down 1.16 cents to 101.00 cents US after volatility on currency markets pushed the loonie slightly below parity for a short while Tuesday.
The dollar is down sharply from a recent high of just over 106 cents at the end of last month as investors flocked to the safety of U.S. treasuries and gold.
Crude oil prices charged ahead more than $3 a barrel after worries about slowing demand pushed prices down 20 per cent from a recent high of almost $100 US on July 26, but later was up $1.99 on the Nymex to $81.29 US a barrel.
Earlier in Asia, the Shanghai Composite Index rose 0.9 per cent and the smaller Shenzhen Composite Index gained 1.4 per cent. Indexes in Taiwan and India also gained. Hong Kong's Hang Seng jumped 2.3 per cent.
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