TORONTO - The Canadian dollar backed away from parity with its American cousin Monday as commodity prices lost ground and investor worried about future global demand if Europe falls back into recession.

The loonie lost 0.21 of a cent to 99.72 cents US.

The U.S. dollar gained some ground after a Commerce Department report showed Americans' income rose last month by the most in nine months, a hopeful sign for the U.S. economy after a year of weak wage gains. But consumer spending was unchanged. The economy relies heavily on consumer spending, and analysts say the economic recovery could stall and energy demand may stay weak if spending doesn't pick up.

The March oil contract was down 78 cents at US$98.78 a barrel.

The February gold contract on the New York Mercantile Exchange fell $1.20 to US$1,731 an ounce and copper shed six cents to US$3.82 a pound.

Heads of European state and governments who met in Brussels on Monday pledged to offer more training for young people to ease their transition to the workforce, deploy unused development funds to create jobs, reduce barriers to doing business across the EU's 27 countries, and ensure that small businesses have access to credit. But they did not offer any new financial stimulus.

Over the course of Europe's two-year-old debt crisis, leaders have repeatedly tried to reassure investors by pledging to cut spending and reduce their deficits. But those austerity measures have hurt growth, and Europe is now facing a new recession.

The latest data showed Spain's economy shrank in the last three months of 2011.

Greece has reached a tentative deal with its private creditors that could avert a disastrous default this spring. Investors holding €206 billion (US$272 billion) in Greek bonds would exchange them for bonds with half the face value. The replacement bonds would have a longer maturity and pay a lower interest rate. When the bonds mature, Greece would have to pay its bondholders only €103 billion.

But because Greece has been in recession for years, some experts fear it could need more rescue loans from its bailout partners — other eurozone countries and the International Monetary Fund — if it is to remain solvent.

The Canadian economic calendar was empty Monday, but later this week will include releases on gross domestic product on Tuesday and employment data Friday.

Benjamin Reitzes, an economist at BMO Capital Markets, said he is expecting Canadian GDP grew in November, through at a modest 0.2 per cent.

"Gains in manufacturing sales, as auto production continued to rebound, and surprisingly solid retail activity should contribute to the headline, while wholesale trade weakened," Reitzes said in a note.

"With the ongoing European crisis, modest U.S. demand, and financial market volatility acting as stiff headwinds on growth into 2012, we expect 1.8 per cent average annualized growth over the fourth quarter 2011 and first quarter 2012."

Other data to watch for this week includes industrial product prices for December on Tuesday and auto sales and the manufacturing PMI for January on Wednesday.

The loonie gained 1.2 per cent last week.

"The loonie has been surprisingly strong of late, as the European debt crisis has eased somewhat. However, the crisis is far from over, and any flare ups will likely weigh on the Canadian dollar," Reitzes said.

"Also, global growth is decelerating, which should keep commodity prices restrained (though geo-political uncertainty could be an offset)."

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