Markets eye Bernanke, European crisis

North American stock markets traded lower Thursday as traders debated whether U.S. Federal Reserve chairman Ben Bernanke would announce new economic stimulus measures in a key speech on Friday and worried about the latest developments in Europe's debt crisis.

In Toronto, the S&P/TSX composite index closed down 59.50 points, or 0.48 per cent, at 12,284.31.  

In New York, the Dow Jones industrial average fell 170.89 points, or 1.51 per cent, to 11,149.82. The S&P 500 was down 18.33 points, or 1.56 per cent, to 1,159.27 while the Nasdaq composite index lost 48.06 points, or 1.95 per cent, to 2,419.63.

Gold prices reversed recent steep losses. December bullion closed up $5.90 US at $1,763.20 US an ounce.

Investors looking for a safe haven had pushed up the price of gold over the last few weeks to above $1,900 as stock markets turned volatile on worries that the U.S. could slip back into recession.   

But profit-taking and higher margin requirements at exchange operator CME Group have pushed gold down more than nine per cent below Monday's latest record close.

Concerns that a second bailout for Greece could fall apart  pushed up Greek bond yields and a sudden drop in Germany's stock market late in the session in Europe also spooked markets in North America.

The Canadian dollar slipped 0.02 of a cent to 101.34 cents US.

Irene pushes up gasoline futures

October crude rose 14 cents to finish at $85.30 US per barrel in New York as traders wondered whether Hurricane Irene, now in the Caribbean, head towards the U.S. east coast.

Analyst Tom Bentz with BNP Paribas Commodity Futures in New York thinks Irene is pushing up oil because of the possible problems that coastal flooding could cause for refineries and shipping. Refineries in Delaware, New Jersey, Pennsylvania and Virginia produce nearly eight per cent of U.S. gasoline and diesel fuel.

Irene is forecast to affect a broad area, from North Carolina to Eastern Canada, with flooding and winds as high as 190 kilometres an hour. Some forecasters think Irene could be the worst hurricane to hit the U.S. Northeast in 50 years.

U.S. gasoline futures rose 4.59 cents to end at $2.8017 a gallon.

Bernanke will deliver a speech just after North American markets open at an economic conference in Jackson Hole, Wyo.

"If you're in Bernanke's shoes, on the one hand you sort of want to pacify the markets because that affects consumer confidence and the market is down quite a bit," said Luciano Orengo, portfolio manager at Manulife Asset Management.

"But at the same time, the economy, although it's slowing down, it is not that evident that we're in a recession or anything like that.

Germany's main index, the DAX, fell about 250 points in a matter of minutes to trade down more than four per cent before recovering somewhat. By the close it was down 1.7 per cent.

Analysts and traders could not immediately identify a reason for the slide. Thilo Mueller of MB Fund Advisory said there was no obvious news to send the market down so suddenly and that the drop came "like lightning out of a clear sky."

"No one has been able to give a rational explanation … I think this is not the last word, I am eager to see if there is a reasonable answer why so many shares plunged at the same time," Mueller told The Associated Press.

Other major markets followed the Dax's lead, with London's FTSE 100 index closing down 1.4 per cent and the Paris CAC 40 shedding 0.7 per cent.

Several European countries that banned short-selling have extended the prohibition until the end of September. 

When concerns about European banks' exposure to Greek debt sent their stocks plummeting two weeks ago, market regulators in Belgium, France, Greece, Italy and Spain stepped in to prohibit traders from betting on the decline in a share's price.

On Thursday, the countries extended the ban and said they would reconsider it at the end of next month. Greece's ban expires in October.

Short-selling is a trade in which the investor borrows an asset and sells it in the hope of buying it back at a lower price to repay the loan, while pocketing the difference.

Before the German market went into reverse, American markets had jumped on news that Warren Buffett's Berkshire Hathaway will invest $5 billion US in Bank of America. The bank's shares closed up 66 cents, or 9.44 per cent, at $7.65 US, after gaining as much as $1.81 during the session.

Bank of America shares had fallen sharply recently as doubts rose about the bank's' capital position.

Shares in Apple Inc. closed down $2.46, or  0.65 per cent, at $373.72 US after Steve Jobs announced he was departing  as the tech giant's CEO and passed the job to Tim Cook, the company's chief operating officer.