TSX falls back under 13,000

The Toronto stock market shed another 126 points Wednesday as U.S.data showed weakness in the world's largest economy.

At the same time, markets coped with another round of anxiety over theGreek debt crisis, which pushed the U.S. dollar higher and oil prices lower.

The S&P/TSX composite index closeddown125.79 points, or one per cent,to 12,972.03.

"People are just moving their risk capital to safer havens and trying to stand back and see what comes out of this." Calgary-based analyst Brian Pow told Reuters.

"It's sell and ask questions later," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn.

U.S. markets fared just as badly, with the benchmark Dow Jones Industrial Average losing 178.84 points, or 1.5 per cent,to sit at 11,897.27, and the tech-laden Nasdaq down 47.26 points, or 1.8 per centto 2,631.46. The S&P 500 lost 22.45 points, or 1.7 per cent, to trade at 1,265.42.

"The markets are nervous, investors are nervous, and so we expect volatility," said Oliver Pursche, president of Gary Goldberg Financial Services.

Oil was also sharply lower, closing down $4.56 at $94.81.

'It's sell and ask questions later.' Steven Goldman, chief market strategist, Weeden & Co.

A day after a better-than-expected retail sales report sent North American markets surging, investors were dismayed with data showing that manufacturing activity deteriorated sharply in the New York region in June.

The Empire State manufacturing survey index released by the New York Federal Reserve fell below zero to 7.8 in June from 11.9 in May. This is the first time the index has been below zero since last November. Economists had expected the index to rebound to 13.3 in June.

"The slump illustrates the extent of the economic slowdown," said Paul Ashworth, chief U.S. economist for Capital Economics in Toronto.

"The detail of the survey was just as disconcerting as the headline, with the new orders, shipments and employment indices all deteriorating sharply."

The U.S. currency advanced against the euro and other currencies Wednesday after euro-zone officials meeting in Brussels on Tuesday didn't make progress on agreeing on a potential second rescue package for Greece.

There are worries that Greece will end up defaulting in some shape or form on its massive debts. That would leave a swathe of banks and financial institutions in peril, and not just in Greece.

Moody's earlier warned of the exposure of French banks to Greece.

"News that Moody's hasput three French banks(SocGen, BNP & Credit Agricole) on credit watch due to their exposure to Greece has been negative for sentiment," said Scotia Capital chief currency strategist Camilla Sutton.

"According to BIS data, France has the largest exposure to Greece debt at $75 billion, while Germany has $45 billion in exposure and the U.K. has $15 billion. Though the market is well aware of these figures, the psychological impact of Moody's warning is negative for EUR."

The Canadian dollar closeddown1.06 cents to 102.15 cents US asdata showed a weakening in Canada's manufacturing sector.Statistics Canada said manufacturing sales in April decreased 1.3 per cent to $46.7 billion with the transportation equipment sector accounting for most of the decline.