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S&P/TSX composite falls on renewed worries about Omicron, impending Fed moves


TORONTO — Canada's main stock index started the trading week on a continued down note as the energy and industrials sectors fell on renewed worries about the latest COVID-19 variant and impending decisions by the U.S. Federal Reserve.

The S&P/TSX composite index closed down 142.17 points to 20,748.45 for its fourth-straight day of losses.

North American investors woke up to headlines from Britain about the first death from the Omicron variant and some data in the U.K. showing that the variant could overtake Delta as the dominant strain, said Mona Mahajan, senior investment strategist at Edward Jones.

"I certainly think the COVID headlines were once again front and centre Monday morning," she said in an interview.

U.S. stock markets were also lower due to virus concerns after posting its strongest week since February with the S&P 500 reaching record highs.

In New York, the Dow Jones industrial average was down 320.04 points at 35,650.95. The S&P 500 index was down 43.05 points at 4,668.97, while the Nasdaq composite was down 217.32 points at 15,413.28. 

"As we're heading towards a week of Fed and central bank meetings, investors may just be taking a bit of a pause here before deciding which way to move towards year-end," Mahajan said.

The Fed is expected on Wednesday to speed up its tapering of quantitative easing stimulus measures and potentially indicate the number of interest rate hikes it expects to make next year. There are also meetings by the Bank of England, Bank of Japan and European Central Bank.

In Canada, a new framework agreement between the federal government and the Bank of Canada announced Monday said the central bank will aim to keep inflation at its historic target rate but will now more formally take into account the health of the job market. 

That essentially puts it more in line with the Fed's dual mandate on inflation and jobs, said Mahajan.

She said it was interesting because both central banks have exceeded their inflation targets in 2021 but Canada is a bit ahead of the U.S. from a labour perspective, with employment rising above pre-pandemic levels in recent months.

"Perhaps there's a little bit of concern that on both of those metrics, the Bank of Canada has has met their targets and could be in a position to (raise interest rates,)" Mahajan said.

The Canadian dollar traded for 78.18 cents US compared with 78.65 cents US on Friday.

The loonie has benefited from the Bank of Canada's tightening policy moving ahead of the U.S.

But the Fed's expected moves to catch up with Canada and the rest of the world may put downward pressure on the Canadian dollar, she said.

Energy and industrials were the biggest laggards among the seven sectors that lost ground on the day.

A drop in crude oil prices pushed energy down 2.9 per cent with Enerplus Corp. and Crescent Point Energy Corp. falling by 5.4 and 4.3 per cent, respectively.

The January crude oil contract was down 38 cents at US$71.29 per barrel and the January natural gas contract was down 13.1 cents at US$3.79 per mmBTU. 

Mahajan said Omicron was putting a little downward pressure on oil demand. A decision by OPEC and its allies not to substantially boost output means WTI prices will likely continue to fall, hitting the mid-$60 level next year, she said.

Industrials lost 1.4 per cent as shares of Air Canada lost 3.2 per cent and Canada's two largest railways declined about 2.2 per cent.

It followed a pattern in the U.S., where travel and leisure names were hit hard ahead of the key holiday season. Mahajan said some people have changed their travel plans based on stricter regulations in the U.S. and Canada. 

Technology decreased 1.3 per cent with Hut 8 Mining Corp. down 6.4 per cent and Shopify Inc. off 3.5 per cent.

Materials joined consumer staples, real estate and utilities in being up on the day with shares of Turquoise Hill Resources Ltd. surging 13.7 per cent.

It rose as the February gold contract was up US$3.50 at US$1,788.30 an ounce and the March copper contract was down less than a penny at US$4.28 a pound. 

This report by The Canadian Press was first published Dec. 13, 2021. 


Ross Marowits, The Canadian Press

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