Loonie weaker as oil prices decline, EU summit raises questions about economy

TORONTO – The Canadian dollar pulled back on Monday as more investors turned to the U.S. dollar as a safe bet and oil prices declined.

The loonie was down 0.44 of a cent at 97.16 cents US.

The shift came as concerns about the European financial crisis grew, pushing more to put their money into the greenback, which pulled down most major currencies around the world.

In commodities, the August crude contract on the New York Mercantile Exchange ended down 55 cents to US$79.21 a barrel, continuing a slump that has brought the price down from $110 in late February.

August gold moved up $21.50 to end at US$1,588.40 an ounce, while July copper rose one cent to US$3.32 a pound.

The leaders of France, Germany, Italy and Spain agreed to push for a growth package of up to €130 billion (US$163 billion) at a European Union summit that’s intended to kick-start the economy and safeguard the currency bloc.

On Monday, Spain formally asked for help for its ailing banking system but its request left many questions unanswered, including how much of the $125 billion loan package offered by other European nations it needed. The uncertainty upset markets, pushing borrowing costs higher for Spain’s government. Spain’s stock market plunged 3.7 per cent.

Cyprus also asked for help, but declined to publicly state how much money is it seeking from the European bailout fund, with a spokesman saying its up for negotiations in the coming days. The island nation is struggling to shore up its banks, which took heavy losses on Greek debt.

In the U.S., further signs emerged of a slow housing recovery as the Commerce Department said Americans bought new homes in May at the fastest pace in more than two years.

Sales of new homes increased 7.6 per cent in May from April to a seasonally adjusted annual rate of 369,000. That’s the best pace since April 2010, the last month that buyers could qualify for a federal home-buying tax credit.