Copper extended losses into a fifth day as demand prospects dimmed due partly to Europe's debt woes. Gold prices fell as some safe-haven buying eased with nervous investors reacting to headlines painting a mixed picture for Europe.

The heavily-weighted materials sector, home to base metal and gold miners, fell more than 1 percent. Financial stocks, down 0.6 percent, were the next biggest drag.

"The groups that are most vulnerable to events out of Europe are the financials and the commodities," said Elvis Picardo, strategist and vice president of research at Global Securities.

Base metals miners fell 2.5 percent, led by First Quantum Minerals, down 7.9 percent to C$18.20. The miner's stock has dropped more than 20 percent the last two sessions.

Shares of Silver Standard Resources also weighed as they plunged to their lowest point in nearly three years, a day after the company cut the reserves at its Pirquitas mine in Argentina by more than half.

TransCanada Corp, down 1.8 percent to C$39.85, was the third most influential decliner. It fell after a US move to put off a decision on whether to approve its proposed $7 billion Keystone XL pipeline for 18 months.

Canadian lenders, which have less exposure to risky European debt holdings than their global counterparts, were down slightly. Canadian Imperial Bank of Commerce was the biggest drag on the financials sector, falling 1.6 percent to C$71.45.

The Toronto Stock Exchange's S&P/TSX composite index closed down 47.35 points, or 0.4 percent, at 12,108.87, clawing back after falling more than 1 percent to a session low of 12,025.57.

The index had dropped 2.7 percent the previous session, its biggest fall in a month, as Italian bond yields rose above 7 percent and sparked widespread selling.

US stocks, crude oil and the euro gained on Thursday as concerns that the euro zone might break up eased and a closely watched Italian debt auction came off better than many feared, albeit at a high cost.

"The liquidity has come out of the market a lot so it's not hard to move this market around plus or minus 1 percent on very little," said Paul Hand, managing director at RBC Capital Markets. "There's obviously massive headline risk on any given day."

Energy stocks, up 0.2 percent, responded to the rise in oil prices, as US December crude rose $2 to approach $100 a barrel, the highest for a front-month contract since July 26.

Adding to the positives was a good earnings day for Canadian retailers, which lifted the consumer discretionary goods subindex 1 percent.

Canadian Tire Corp's class A shares rose more than 4 percent to C$62 after it reported a 36 percent jump in earnings, benefiting from its August acquisition of the Forzani sporting-goods chain.

Tim Hortons Inc shares were up 1.1 percent to C$50.09 after Canada's top restaurant chain reported a 40 percent jump in third-quarter profit on strong sales, despite challenging North American operating conditions.

"The elements seem to be in place for a seasonal rally, but Europe continues to be the biggest overhang on the markets as a whole," Picardo added.