TORONTO - The Toronto stock market closed little changed at the end of a volatile session Tuesday as buyers stepped up late in the session following a big selloff in equities last week amid worries about the European debt crisis and its effect on the global economic recovery.

The S&P/TSX composite index closed well above the lows of the session, coming back from a 258-point deficit to close down 3.27 points at 11,518.08 as gold stocks strengthened and early losses in commodity and financial stocks moderated.

Investors again fled to the perceived safe haven of U.S. Treasury Bills, which sent other currencies lower.

The Canadian dollar closed down 0.94 of a cent at 93.46 cents US after bouncing off an eight-month low of 92.18 cents US earlier in the day.

Heavy buying of American dollars sent yields and interest rates lower. The benchmark 10-year U.S. Treasury note's yield fell to its lowest level since April 2009, going as low as 3.07 per cent.

The improvement on markets followed severe losses last week as investors lost confidence that a US$1-trillion aid package is enough to deal with severe debt problems plaguing countries such as Greece, Spain and Portugal.

The TSX and the Dow industrials both fell about four per cent last week.

Traders also worry that the steep spending cuts needed to deal with the debt crisis will drag down an economic recovery on the continent and possibly impact the global recovery as well.

European Union leaders warned Tuesday that the continent's economy would stagnate unless governments make major reforms to promote growth. But large debts in some countries make it difficult to implement stimulus measures to rally economies.

On the Toronto market, the energy sector was 1.45 per cent lower as the July crude contract on the New York Mercantile Exchange dropped $1.46 to US$68.75 a barrel. Suncor Energy (TSX:SU) gave back 53 cents to C$30.66 while Canadian Natural Resources (TSX:CNQ) was down 39 cents at C$34.30.

The July copper contract in New York declined 11 cents to US$3.04 a pound, pushing the base metals sector down two per cent. Teck Resources (TSX:TCK.B) shook off early losses to advance 55 cents to C$34.30.

But First Quantum Minerals (TSX:FM) tumbled $7.43, or 11.83 per cent, to $55.36 on negative news from the Democratic Republic of Congo, where the company has its Frontier copper project.

Katanga, Congo's southern mining province, has imposed a US$60 per tonne tax on semi-finished product exports, which include the copper concentrate from which the metal is derived.

The financial sector lost 0.5 per cent after news that four Spanish savings banks had announced plans to merge amid concerns over solvency in the sector.

The move, announced late Monday, came after the Bank of Spain bailed out Andalusian savings bank Cajasur on the weekend, after its merger talks broke down.

Bank of Montreal (TSX:BMO) was down 99 cents at $58.71 while CIBC (TSX:CM) gained $1.14 to $74.95.

"You have to remember again that a number of these European banks do hold a significant amount of bonds, whether it's Greece or Spain or Portugal and at a time when they're still struggling, particularly Spain with the housing related loans, still struggling on that front," observed Mark Chandler, fixed income strategist at RBC Capital Markets.

"They simply cannot bear the potential losses that may occur from the government debt holdings that they have. So it becomes more expensive for these banks to finance themselves and for central bankers, the real concern now is short-term funding for the banking system."

The dip in the financial sector comes just before the big Canadian financial institutions release quarterly financial results later in the week.

Analysts expect earnings to be fairly strong but "it's the visibility, guidance as we go forward, that has investors somewhat nervous," said Paul Taylor, chief investment officer at BMO Harris Private Banking.

"The banks have rallied significantly so there are a lot of people looking for the opportunity to park money on the sidelines."

Gold prices were up $4 at US$1,198 an ounce, sending the bullion sector higher. Barrick Gold Corp. (TSX:ABX) improved $1.92 to C$45.30 while Goldcorp Inc. (TSX:G) rose $2.25 to C$45.61.

The TSX Venture Exchange declined 3.24 points to 1,450.15.

New York markets were weak amid mixed economic news.

"The market is looking for a reason to go down," said Taylor. "Any news is being greeted as glass half-empty."

The Dow Jones industrial average improved as the day went on, coming back from a loss of over 250 points to dip just 22.82 points to 10,043.75 at the close.

The Nasdaq composite index moved down 2.6 points to 2,210.95 while the S&P 500 index added 0.38 of a point to 1,074.30.

American home prices fell in March from the previous month, a sign of a weakening housing market despite historically low mortgage rates and now-expired tax credits. The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday posted a 0.5 per cent drop from February.

However, other data showed rising confidence about the U.S. economy. The Conference Board said that its U.S. consumer confidence index rose to 63.3, up from a revised 57.7 reading in April. Economists surveyed by Thomson Reuters had expected 59.

In corporate news, Maple Leaf Foods (TSX:MFI) said it is renewing efforts to sell its Ontario pork processing business in Burlington, Ont.. Sale of the operation would be the last phase of a strategic refocusing of the company's business activities. Maple Leaf shares moved 24 cents higher to $9.58.

Stem Cell Therapeutics Corp. (TSXV:SSS) shares tumbled 29.5 cents or 74.68 per cent to 10 cents after second-stage tests for a drug intended to treat strokes failed.

World markets were also hurt by reports that North Korean leader Kim Jong Il has ordered his military to combat alert because of rising tensions on the Korean peninsula after the North was blamed for sinking a South Korean warship.