TORONTO - The Toronto stock market started June trading sharply lower Tuesday as sentiment on commodity demand was dampened by a report showing that manufacturing in China slowed in May while concerns about the eurozone economy persisted.

The S&P/TSX composite index tumbled 191.02 points to 11,571.97, while the TSX Venture Exchange was down 25.32 points at 1,488.75.

Investors also took in a widely expected quarter-point hike in the Bank of Canada's key interest rate to 0.5 per cent. The Canadian dollar fell heavily despite the hike, down 0.95 of a cent to 94.88 cents US, pushed lower by uncertainty over what the central bank will do about raising rates in the future.

The central bank said economic conditions around the world are uneven and acknowledged "the possibility of renewed weakness in Europe," adding that "the required rebalancing of global growth has not yet materialized."

"The Bank of Canada now is keeping its policy options fairly open," said Sal Guatieri, senior economist at BMO Capital Markets.

"It certainly won't be on autopilot in raising interest rates over the next few months," Guatieri said.

One of the bright spots on the TSX was Scotiabank (TSX:BNS), which turned in a record profit of nearly $1.1 billion or $1.02 a share, beating analyst estimates of about 93 cents per share. Earnings were up sharply from $225 million a year ago. The bank's provision for credit losses was reduced to $338 million, down $151 million from the same time last year. Its shares rose $1.27 to $49.52.

Other financial stocks contributed to the sharply lower TSX session, with Royal Bank (TSX:RY) down 92 cents to $54.20 and TD Bank (TSX:TD) falling $1 to $70.75. Both banks delivered earnings reports last week that missed some analyst forecasts.

Worries about China were in focus after surveys showed that growth in the country's manufacturing sector had slowed. The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index fell to 53.9 in May from 55.7 in April and 55.1 in March due to lacklustre demand both at home and abroad.

Strong Chinese growth has helped lead the global economy out of recession and has been particularly beneficial to the resource-heavy Toronto stock market because of heavy demand for oil and metals.

Earlier in the session, ongoing concerns about the European debt crisis pushed the euro to a new four-year low of US$1.2112 before it rebounded to US$1.2242. The euro has been seen as an indication of confidence in whether countries like Greece, Spain and Portugal will be able to cut spending to contain mounting debt without stalling the economic recovery.

The base metals segment was the leading decliner, down almost six per cent as July copper in New York was off early lows but still four cents lower at US$3.07 a pound.

Teck Resources (TSX:TCK.B) fell $2.67 to C$33.87 while Quadra FNX Mining (TSX:QUX) fell $1.44 to C$13.26.

Copper prices and mining stocks have both suffered over the past month. Copper prices fell almost eight per cent in May and the base metals sector was down 11.5 per cent on worries about the economic rebound and falling demand.

"What appears to be happening (in China) is that they're digging into their commodity reserves and using those as opposed to necessarily increasing their demand," said Don Reed, president and CEO of Franklin Templeton Investments Corp..

"However, over the intermediate and longer term, this provides pent-up demand."

The energy sector fell 3.29 per cent as the July crude contract on the New York Mercantile Exchange lost $1.39 to US$72.58 a barrel. Canadian Natural Resources (TSX:CNQ) dropped $2.10 to C$35.15 while Suncor Energy (TSX:SU) was down 61 cents at C$31.89.

The industrials sector moved down almost two per cent as transportation giant Bombardier Inc. (TSX:BBD.B) lost 24 cents to $4.61.

The TSX global gold sector put in a modest increase as investors seeking safe havens pushed the August bullion contract on the Nymex up $11.90 to US$1,226.90 an ounce. Barrick Gold Corp. (TSX:ABX) improved by 76 cents to C$44.91.

Reports on U.S. construction spending and manufacturing, which signalled that the American economy is continuing to recover, had earlier helped counterbalance concerns surrounding China and Europe.

The U.S. Commerce Department said construction spending rose by 2.7 per cent in April, the biggest amount in nearly a decade, after economists had forecast spending would be flat.

Meanwhile, the Institute for Supply Management said its manufacturing index fell to 59.7 in May from 60.4 in April, still better than the average forecast of 59.0 by economists.

But the Dow Jones industrial average fell 112.61 points to 10,024.02. The Nasdaq composite index moved 34.71 points lower to 2,222.33 while the S&P 500 index dropped 18.7 points to 1,070.71.

In other corporate news, BP's U.S.-listed shares dropped $6.67, or 15.5 per cent, to US$36.28 on the New York Stock Exchange. The company said its costs tied to the Gulf of Mexico oil spill are nearing US$1 billion. Shares of Transocean Ltd., which drilled and operated the well, fell $6.43, or 14.97 per cent, to US$36.52.

Hewlett-Packard Co. lost 43 cents to US$45.58 after it said it would cut about 9,000 jobs and record US$1 billion in charges in the next several years as it creates fully automated commercial data centres. The technology company expects to save as much as US$700 million annually.

Anaconda Mining Inc. (TSX:ANX) shares surged 4.5 cents to 32 cents after it struck a deal to acquire interests in two significant iron exploration portfolios from a private Chilean company, Inversiones SBX Limitada.

WestJet Airlines Ltd. (TSX:WJA) is close to forging a new partnership with a U.S. airline as it seeks to draw more international traffic into its network. The Calgary-based airline's CEO says the company is "just on the verge" of being able to announce something on that front, but can't provide any details yet. WestJet shares were unchanged at $11.85.