By Fergal Smith
TORONTO (Reuters) - Canada's main stock index fell on Monday to its lowest level in nearly three weeks, pressured by tax-loss selling and the spread of the Omicron variant as well as a decline in the shares of Bank of Montreal after its biggest takeover deal ever.
The Toronto Stock Exchange's S&P/TSX composite index ended down 200.97 points, or 0.97%, at 20,538.22, its lowest closing level since Dec. 1.
Wall Street also fell as European nations weighed new restrictions to limit the spread of the Omicron variant and prospects of a U.S. domestic spending bill suffered a setback.
"The markets have a lot to be worried about," said Greg Taylor, a portfolio manager at Purpose Investments. "You've also got the tax-loss selling. ... The golds and cannabis and some of the renewable energy stocks have really been crushed."
Investors often exercise tax-loss selling strategies, dumping stocks that have performed poorly in order to reduce capital gains taxes, as the year draws to a close.
The Toronto market has retreated 5.8% since notching a record high in November, but investors have not lost hope of a year-end rally.
"There's still time for a bounce," Taylor said. "There's still this wall of cash and people that want to buy dips."
The heavily weighted financials group fell 0.9% on Monday, with Bank of Montreal down 1.9% after saying it will buy BNP Paribas' U.S. unit, Bank of the West, for $16.3 billion.
The healthcare sector lost 2.7%, including declines for cannabis producers, while technology declined 1.8% and industrials ended 2.5% lower.
Shares of Lundin Mining Corp tumbled 16.9% after the company said it would buy sister firm Josemaria Resources Inc.
The materials group, which includes precious and base metals miners and fertilizer companies, fell 0.5%, while energy gained 0.3% despite oil settling 3.7% lower.
(Reporting by Fergal Smith; Additional reporting by Amal S in Bengaluru; Editing by Peter Cooney)