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In this Aug. 8. 2011 file photo, a Wall Street sign hangs near the New York Stock Exchange, in New York.Jin Lee/The Associated Press

North American markets closed sharply lower amid news of widening trade deficits both north and south of the border.

Toronto's S&P/TSX composite index plunged 193.53 points to 15,173.94, despite higher commodity prices that saw oil break through the $60-a-barrel (U.S.) mark.

The loonie was up 0.14 of a U.S. cent at 82.84 cents.

In economic news, trade deficits in both Canada and the U.S. grew in March, with the Canadian gap hitting a record $3-billion as the drop in oil prices weighed heavily on exports. In the U.S. the trade deficit rose to $51.4-billion, the most since October 2008 as a small increase in exports was overwhelmed by a big increase in imports.

Royal Bank of Canada and Toronto-Dominion Bank, the nation's largest lenders, retreated at least 0.8 per cent as financial stocks slumped. Alimentation Couche-Tard Inc., the convenience store operator, lost 2.7 per cent to pace a decline among consumer-staples retailers. Canadian Pacific Railway Ltd. and Canadian National Railway Co., the nation's largest rail operators, tumbled at least 1.5 per cent.

The MSCI All-Country World Index fell 0.9 per cent, as the U.S. benchmark S&P 500 slumped the most in almost six weeks and the Stoxx Europe 600 Index dropped to an eight-week low.

Wolfgang Schaeuble, the German Finance Minister, said Greece and its creditors may not be able to complete the work needed for an agreement on financial aid before about €1-billion euros ($1.1-billion) of payments become due to the International Monetary Fund on May 12.

"The trade deficit story is important, and probably driving most of what's happening today," said Roland Chalupka, chief investment officer at Fiduciary Trust Canada, the wealth management arm of Franklin Templeton Investments Corp. "Canadians continue to import, and they show no signs of spending slowing down, but we're not exporting as much, so our deficit widened out."

Canada posted a record trade gap in March as the value of energy exports declined and imports of consumer goods increased. The $3.02-billion deficit topped the $2.87-billion record set in July 2012 and exceeded the highest forecast of $1.33-billion in a Bloomberg economist survey.

All 10 industries in the S&P/TSX retreated at least 0.5 per cent, on trading volume 10 per cent higher than the 30-day average today.

Couche-Tard fell 2.7 per cent and Loblaw Cos. lost 1.3 per cent as consumer-staples companies declined 1.5 per cent as a group. Industrial stocks tumbled 1.9 percent, led by the railroad operators.

Pacific Rubiales Energy Corp. jumped 18 per cent in trading on alternative markets after the company received a takeover approach by Alfa SAB and Harbour Energy Ltd. that values it at about $6-billion including debt, according to people with knowledge of the matter.

U.S. stocks also finished sharply lower on Tuesday after a surprisingly wide March U.S. trade deficit raised concerns that the economy shrank in the first quarter.

The March deficit was the highest in nearly 6-1/2 years and larger than the $45.2-billion the government assumed in its snapshot of first-quarter gross domestic product last week, suggesting the economy had contracted.

"A negative number is scary for the market," said Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Investments.

"It was something of a one-two punch between the trade-deficit report and higher interest rates that began overseas," he said of Tuesday's stock selloff.

Long-term U.S. Treasury yields along with German Bunds rose on a host of factors including less pessimism about Europe, and easing downward pressure on U.S. and European inflation.

With corporate earnings season winding down, U.S. investors are bracing for an April payroll report due on Friday that could give a hint of when the U.S. Federal Reserve will begin raising interest rates.

All 10 major S&P sectors fell, with the utilities index slumping 2.28 per cent as investors dumped dividend stocks to take advantage of yields on benchmark 10-year Treasury notes at nearly two-month highs.

Despite a rally of 2 per cent in oil, energy stocks were stung for a second day by criticism of fracking companies by David Einhorn, the influential head of hedge fund Greenlight Capital. The energy sector fell 1.10 per cent.

Weighed down by a 2.25-per-cent decline in Apple, technology stocks were the biggest drag on the three major indexes, erasing the Nasdaq's gains of the past two days.

The Dow Jones industrial average fell 142.2 points, or 0.79 per cent, to end at 17,927.2. The S&P 500 lost 25.03 points, or 1.18 per cent, to 2,089.46 and the Nasdaq Composite dropped 77.60 points, or 1.55 per cent, to end the session at 4,939.33.

Kellogg fell 1.48 per cent to $63.18 after the world's largest maker of breakfast cereals' net sales fell 5 per cent.

Cosmetics maker Estee Lauder rose 4.02 per cent after better-than-expected profit.

After the bell, Groupon posted first-quarter revenue below expectations and its stock was down 2.2 per cent in extended trade.

Tuesday's decline in stocks is only the most recent of several volatile sessions. Over the two weeks through Friday, the S&P 500 moved an average of 17.79 points daily, wider than the 12.43 point range in early March.

With files from Reuters and Bloomberg

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