North American stock markets fall on COVID-19 travel bans, oil and loonie close lower

·4 min read

TORONTO — Most North American stock markets fell Monday as a new strain of the coronavirus led to countries including Canada restricting travel from the United Kingdom, raising worries of more economic disruption after months of volatility.

The benchmark S&P/TSX composite index closed down 33.74 points at 17,500.89 after Ottawa said late Sunday passenger flights from the U.K. into Canada would be suspended for 72 hours in an attempt to keep out the new strain of COVID-19 discovered by British health officials.

In the United States, the S&P 500 index was down 14.49 points at 3,694.92, while the Nasdaq composite was down 13.12 points at 12,742.52. The Dow Jones industrial average gained 37.40 points at 30,216.45.

"The week is starting off on a 'risk-off' note and really that's on fears that the new strain of the virus that was reported in England will result in new lockdowns and potentially impact global growth. That's the main story," said Angelo Kourkafas, an analyst on the investment strategy team at Edward Jones.

"Over the weekend, we saw news of renewed travel bans in Europe and today in Canada new widespread restrictions in Ontario. Clearly, that shows up in the asset class leadership which is reflecting this cautious sentiment with energy shares lagging while technology is outperforming."

The Canadian dollar traded lower at 77.83 cents US compared with 78.28 cents US on Friday.

The February crude oil contract was down US$1.27 at US$47.97 per barrel and the January natural gas contract was down half a cent at about US$2.70 per mmBTU.

Lower oil prices hit several Canadian energy companies and the energy sector had the worst of the sectoral results for Monday, dropping 2.67 per cent.

Enerplus Corp. fell 7.24 per cent and Vermilion Energy Inc., MEG Energy Corp. and Crescent Point Energy Corp. were all off by more than six per cent. Cenovus Energy Inc., which announced Monday it had received all the key regulatory approvals for its takeover of Husky Energy Inc., fell 2.77 per cent.

"We think, definitely, oil and the Canadian dollar are responding to what we are seeing as the economic conditions that are likely to be affected in the near term because of COVID," said Kourkafas.

"We think the ride will be bumpy until we go probably in the second half of 2021 where the vaccine's going to be widely distributed and that's going to help the economic reopening once that takes place."

The decline in American markets could have been worse if not for two pieces of positive news, the analyst said, noting progress on a U.S. pandemic stimulus package worth US$900 billion and a decision from the U.S. Federal Reserve to loosen its ban on share buybacks for the largest U.S. banks.

"We have some volatility today. That should not come as a surprise to investors because we have been through a very strong couple of months since the beginning of November. The TSX is up 12 per cent in a fairly uninterrupted fashion," said Kourkafas.

"So this is a reminder that the economy still has to face the virus-driven headwinds."

The best-performing sector in Toronto was information technology, up 1.95 per cent on strong performances from several software companies.

Kinaxis Inc. rose 6.27 per cent and Lightspeed Pos Inc. was up 5.17 per cent. Constellation Software Inc. jumped by nearly $50 or three per cent to $1,695.31 and Shopify Inc. was up $36.52 or 2.43 per cent to $1,537.44.

The consumer discretionary sector fell 0.46 per cent despite a 16.84 per cent increase in Great Canadian Gaming Corp. after New York hedge fund Apollo Global Management raised its go-private offer.

The February gold contract was down US$6.10 at US$1,882.80 an ounce and the March copper contract was down about five cents at US$3.58 a pound.

By Dan Healing in Calgary

This report by The Canadian Press was first published Dec. 21, 2020.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X, TSX:ERF, TSX:CVE, TSX:VET, TSX:CPG, TSX:MEG, TSX:KXS, TSX:LSPD, TSX:SHOP, TSX:CSU)

The Canadian Press