The Toronto stock market was lower Wednesday as differences of opinion about tackling the European government debt crisis appeared ahead of a summit of all 27 European Union leaders.
“The markets are hedging their bets, they're getting large and liquid,” said John Stephenson, portfolio manager at First Asset Funds Inc.
“They're sitting on the sidelines, not putting any money to work before this announcement.”
The S&P/TSX composite index lost 27.18 points to 12,054.06 while the TSX Venture Exchange dipped 5.52 points to 1,537.17.
The Canadian dollar lost 0.18 of a cent to 98.87 cents US.
U.S. markets were weak with the Dow Jones industrial average down 37.92 points to 12,112.21.
The Nasdaq composite index was 25.14 points lower to 2,624.42 and the S&P index slipped 8.42 points to 1,250.05.
Markets turned lower after a senior German official suggested that European leaders could fail to agree on a plan to tighten the continent's economic ties by the end of the week.
Instead, the official said it could take until Christmas for changes to the European Union treaty to be agreed upon, a critical first step in saving the euro.
He added that the government of Chancellor Angela Merkel is insisting on either a substantial change to the treaty governing the 27 EU countries, or an entirely new treaty for the 17 countries that use the euro to centralize decision-making on spending and borrowing for the 17 countries that use the euro.
Herman Van Rompuy, the president of the European Council, had earlier said an easier way to get agreement on future fiscal discipline would be to simply amend existing rules.
The treaty proposal is set to form the basis of discussions at the EU summit in Brussels on Friday.
Sentiment had improved Tuesday following a report that European leaders might create a second bailout fund to supplement the one they have already agreed to. The second fund would nearly double the capacity of Europe's financial rescue programs, the Financial Times reported.
But Bloomberg News reported Wednesday that Germany was rejecting proposals to combine the bailout funds.
“There is no clear path forward, just lots of potential avenues, some of which are quite creative,” added Stephenson.
“But does it mean they're going to be able to successfully pull if off? That's a whole other kettle of fish.”
The TSX energy sector lost one per cent as price declines in crude accelerated on data showing American crude inventories unexpectedly rose by 1.3 million barrels last week. The January crude contract on the New York Mercantile Exchange fell $1 to $100.28 (U.S.) a barrel. Suncor Energy (TSX:SU) declined 37 cents to $30.50.
The base metals sector was down 0.46 as metal prices also backed off with the March copper contract down two cents to US$3.55 a pound. Teck Resources (TSX:TCK.B) was down 53 cents to $38.19.
Bank of Montreal (TSX:BMO) weighed on the TSX, down $1 to $56.74. The drop added to a 3.5 per cent slide Tuesday following a disappointing earnings report that had handful of analysts scaling back their recommendations, including Rob Sedran of CIBC Capital Markets who downgraded the stock to sector underperformer.
BMO said Wednesday that it is hiring the head of Metrolinx, the agency that operates GO Transit for the Ontario government, as its chairman. The bank says Robert Prichard, also a former CEO at Torstar Corp. (TSX:TS.B), will take the position after serving as an independent director of BMO since 2000.
Laurentian Bank (TSX:LB) gained 24 cents to $43.81 as it said its fourth-quarter profit fell to $28.6 million or $1.06 per share from $32.5 million or $1.24 per share a year earlier. Excluding one-time costs, adjusted earnings per share were up six per cent to $1.31.
Gold stocks declined while bullion prices headed higher with the February contract in New York up $2.50 to US$1,734.30. Goldcorp Inc. (TSX:G) faded 37 cents to $52.17.
In Asia, Japan's Nikkei 225 jumped 1.7 per cent, South Korea's Kospi added 0.9 per cent and Hong Kong's Hang Seng gained 1.6 per cent.
Mainland Chinese shares edged higher, with the benchmark Shanghai Composite Index climbing 0.3 per cent .
European markets were weak a day before the European Central Bank makes its next announcement on interest rates. There are hopes that the ECB will cut its key rate by 0.25 of a point. Many economists reckon the region is heading towards another recession.
London's FTSE 100 index slipped 0.97 per cent, Frankfurt's DAX was off 1.09 per cent and the Paris CAC 40 was down 0.31 per cent.
In other corporate news, Dollarama Inc. (TSX:DOL) shares gained 61 cents to $40.93 after it reported that third-quarter net earnings grew to $41.8 million from $31.3 million a year ago. Sales increased 12.5 per cent to $400.3 million, helped by its opening of 10 new stores in the period, or 51 stores since a year earlier.
Cenovus Energy Inc. (TSX:CVE) plans to spend between $3.1 billion and $3.4 billion in 2012 as it pushes forward with the expansion of its Christina Lake oil sands project. That's about 23 per cent higher than its capital spending budget for this year. Its shares lost 16 cents to $32.91.
U.S. department store operator J.C. Penney Co. is buying a 16.6 per cent stake in Martha Stewart Living Omnimedia Inc. for $38.5 million and teaming with the media and merchandising company on a store-within-a-store and joint web site.