By John Tilak
TORONTO (Reuters) - Canada's main stock index slumped on Wednesday, with every major sector trading in the red, after sluggish data from Europe and the United States renewed fears about the global economic recovery.
Investors were discouraged by data showing U.S. factory output dropped in April and manufacturing activity in New York state contracted this month. Further, wholesale prices recorded their largest decline in three years.
Germany's economy crept back into growth at the start of the year but not by enough to stop the euro zone from contracting for a sixth straight quarter, and France slid into recession.
The slew of data helped weaken prices of bullion and other commodities, causing shares of gold producers to tumble.
The resource-sensitive Toronto index, which reacts sharply to the global growth story, hit a one-week low despite gains made by U.S. stocks.
"The TSX is a proxy for global growth," said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver. "Any hint of weakness in influential regions like the U.S. and Europe tends to affect us quite disproportionately."
The sharp decline in the Canadian market was indicative of the contrast this year in the fortunes of the Toronto index and the S&P 500 (.SPX). While the TSX is barely up since the start of the year, the S&P 500 has climbed about 16 percent.
"There's a distinct lack of appetite for Canadian stocks," Picardo said. "It does seem the theme of the year is to avoid Canadian stocks regardless of what news comes out and pile into U.S. equities."
The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) closed down 103.40 points, or 0.82 percent, at 12,473.65. The market hit its lowest point since May 7.
"The numbers are indicating a knee-jerk reaction through the market, which is affecting people's perceived demand for commodities and prospects for manufacturing," said Michael Sprung, president of Sprung Investment Management.
All of the 10 main sectors on the index were in the red.
The materials sector, which includes mining stocks, slipped 2.7 percent, hurt by a decline in gold shares.
The gold sector, down 37 percent since the start of the year, fell 4.6 percent as a strong U.S. dollar pulled down bullion prices to a near one-month low.
"With the economy faltering and the debt levels generally rising, it's surprising to see the pressure continue on gold," Sprung said. He said the only explanation was that people are looking for safety in the U.S. dollar and U.S. treasuries.
First Majestic Silver Corp (Toronto:FR.TO - News) cut its 2013 capital expenditure estimate and warned of further cuts later this year as it looks to blunt the effects of falling prices of silver. The stock fell 9 percent.
Energy shares fell 0.6 percent.
(Editing by Chris Reese and Andrew Hay)