Fears over a COVID variant have sent the S&P/TSX composite down nearly 500 points

Key takeaways:

• Fears of a new COVID type in southern Africa prompted a widespread selloff by worried investors.
• The December gold contract rose $1.20 to $1,785.50 per ounce, while the March copper contract fell 18 cents to $4.29 per pound.

Fears over a new COVID type in southern Africa spurred a broad-based selloff by frightened investors, causing Canada’s primary stock index to have its worst day in more than a year on Friday.

ON FRIDAY, the S&P/TSX composite index was down 487.28 points at 21,125.90, with all but nine of the benchmark’s 231 firms doing poorly.

Airlines and other travel-related stocks were among the hardest impacted industries and firms, as they gained the most from recent worldwide progress in containing the COVID-19 epidemic. 

On expectations that a new variation may affect travel demand or lead to additional government-imposed travel restrictions, Air Canada suffered one of the greatest hits, with its stock dropping nearly 9%.

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Energy stocks also took a hit as the price of oil dropped by more than a third. MEG Energy Corp., an oil business, was down nearly 11%, while Crescent Point Energy Corp. was down 8.6%.

Vice-president and portfolio manager at AGF Investments Inc., Mike Archibald, stated, “Oil prices are getting completely barbecued here.” “This would be the worst day since April of last year when the price (of oil) turned negative,” says the analyst.

Stocks in the United States have also fallen. On Thursday, the U.S. Thanksgiving holiday, the Dow Jones industrial average closed down 905.04 points at 34,899.34 in a shorter trading day in New York. 

The S& P 500 index ended the day at 4,594.62, down 106.84 points, while the Nasdaq composite finished at 15,491.66, down 353.57 points.

The stock market fluctuations on Friday were worsened by low liquidity, according to Archibald, because many traders were away from their desks for the U.S. holiday weekend.

“We’ll have to wait and see how things progress in the next days. However, the market is concerned about whether this will result in another Delta-variant-like circumstance, “he stated

According to Archibald, the market “never bottoms on a Friday,” so investors should expect more volatility — and perhaps more negative headlines — in the next week.

The dollar rose against all other currencies on Friday, and the price of gold rose, Archibald added, indicating a “clear rush to safety” by nervous investors.

Despite Friday’s drop, he pointed out that the market is still up overall, and it’s too early to determine whether the news from Africa would impact the favorable long-term trend.

“It’s still too early to say what the ramifications are,” Archibald added. “There is some trepidation here until we get some more data from these places that indicate these incidences,” says the researcher.

Cases of the new type, dubbed Omicron, have been reported in Hong Kong, Belgium, Tel Aviv, and large South African cities such as Johannesburg.

This variant’s economic effects were already being felt. On Friday, Canada, the European Union, and the United Kingdom issued travel restrictions from southern Africa. Following the market’s closure, the U.S. imposed travel restrictions on citizens of South Africa and seven other African countries.

The variation is “extremely transmissible,” according to the World Health Organization.

The Canadian dollar was selling at 78.30 cents U.S. on Friday, down from 79.03 cents U.S. the day before.

The January crude oil contract was down $10.24 at $68.15 per barrel, while the January natural gas contract was up 36 cents at $5.48 per million British thermal units.

The December gold contract rose $1.20 to $1,785.50 per ounce, while the March copper contract fell 18 cents to $4.29 per pound.

Source: CTV News

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