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Two men check a monitor displaying the stock exchange index in Milan, Italy, Wednesday, Dec. 28, 2011. (Luca Bruno/Luca Bruno/AP)
Two men check a monitor displaying the stock exchange index in Milan, Italy, Wednesday, Dec. 28, 2011. (Luca Bruno/Luca Bruno/AP)

TSX takes tumble after holiday break Add to ...

Fears of a slowing global economy continued to pressure the Toronto stock market Wednesday.

The S&P/TSX composite index tumbled, led by falling resource and bank stocks following a four-day shutdown for the Christmas and Boxing Day holidays. The TSX Venture Exchange was also down.

Worries about a return to recessionary conditions in many parts of the world have helped push the TSX down about 12 per cent this year.

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The Canadian dollar was up 0.64 of a cent to 98.6 cents (U.S.).

U.S. markets were also negative with the Dow Jones industrial average was down, the Nasdaq composite index dropped and the S&P 500 index declined.

Despite the tepid showing on markets, traders were encouraged by a pair of successful Italian bond auctions which forced down the interest rate the country pays on its debt.

The Bank of Italy said Wednesday the average yield on its €9-billion six-month offering was 3.251 per cent, half the 6.504 per cent rate it had to pay at the equivalent auction last month. An auction of two-year bills, which raised €1.73-billion, also saw the yield fall to 4.853 per cent from 7.814 per cent last month.

A day earlier, the interest rate that Rome pays to borrow money for 10 years shot past seven per cent, a level that has forced other countries to seek bailouts because they couldn't keep up with a yield that high over the long term.

Italy is considered too big to rescue in the way Portugal, Ireland and Greece were bailed out, and investors fear that if it is squeezed out of borrowing from markets, the euro won't survive.

At the same time, the European Central Bank said the continent's banks parked a record $590.72-billion overnight at the bank, reflecting distrust in the European banking system.

The TSX energy sector fell 0.8 per cent as the February crude contract on the New York Mercantile Exchange dropped 84 cents to $100.50.

Oil prices jumped Tuesday amid threats from Iran to close the vital Straits of Hormuz at the mouth of the Persian Gulf, the passageway for one-sixth of the world's oil shipments.

Oil advanced $1.66 Tuesday after Iranian vice-president Mohamed Reza Rahimi threatened that Iran will close the strait, cutting off oil exports, if the West imposes sanctions on Iranian oil shipments to punish Tehran for its nuclear program.

Suncor Energy fell 55 cents to $28.73.

The base metals sector lost 2.2 per cent as the March copper contract in New York added two cents to $3.43 (U.S.) a pound. Teck Resources lost $1.16 to $35.12.

The gold sector fell 2.7 per cent while the February gold contract lost $5.50 to $1,590 an ounce. Barrick Gold Corp. fell $1.21 to $45.73.

Financials also contributed to the negative showing, down 0.75 per cent with Royal Bank of Canada down 67 cents to $50.63.

European markets were positive in the wake of the Italian bond auction with London's FTSE 100 index ahead 0.99 per cent, Frankfurt's DAX 30 gained 0.07 per cent while the Paris CAC 40 added 0.22 per cent.

In Asia, stocks fell overnight, mostly because of concerns about the broader economy.

Japan's Nikkei 225 index fell 0.2 per cent after news that its industrial output dropped a seasonally adjusted 2.6 per cent last month, the first decline in two months.

Hong Kong's Hang Seng Index fell 0.6 per cent while South Korea's Kospi lost 0.9 per cent.

There are also concerns of a slowdown in China.

The Shanghai Composite Index rose 0.2 per cent while the smaller Shenzhen Composite Index sank 0.5 per cent.

On the corporate front, Shoppers Drug Mart was down $1.07 to $40.93 after the Ontario government on Friday won an appeal restoring a ban on private label generic drugs in an ongoing battle with Shoppers and other big pharmacy chains.

It was the latest salvo in a battle with the drug companies over a provincial move to disallow professional allowance fees that generic drug companies paid to the retail pharmacy chains for stocking their products. Pharmacies said getting rid of those fees cost them an estimated $750-million a year in revenue and they have been looking for ways to get back money in other areas.

RuggedCom Inc. has adopted a poison pill shareholder rights plan to give its directors time to look for alternatives to an unsolicited $272.4-million takeover bid by Belden Inc. . RuggedCom's shareholder rights plan will allow the board of directors to double the number of shares outstanding under certain circumstances. Its shares dropped 30 cents to $23.75.

Aircraft and train builder Bombardier Inc. said Wednesday it had won a government-subsidized $295-million order for 130 new rail carriages, months after it announced it would cut about 1,400 jobs in Britain and questioned its future in the country. Bombardier shares added a cent to $3.87.

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