Canada’s main stock index tumbled down more than 480 points Tuesday amid fresh worries about the latest COVID-19 variant.
Investor anxiety over the fast-spreading Omicron variant also drove losses on Wall Street, one day after North American stock markets had partially recovered from Friday’s steep plunge.
The S&P/TSX composite index was down 489.01 points at 20,659.99.
In New York, the Dow Jones industrial average was down 652.22 points at 34,483.72. The S&P 500 index was down 88.27 points at 4,567.00, while the Nasdaq composite was down 245.14 points at 15,537.69.
News over the weekend that Omicron may induce only mild infection gave investors a sense of comfort, and stock markets rallied slightly Monday after suffering their worst day in more than a year to end last week.
But the variant jitters came back in earnest Tuesday, as the CEO of Moderna predicted in an interview with the Financial Times that existing COVID-19 vaccines may be less effective with Omicron than earlier variants. Regeneron also said Tuesday that its monoclonal antibody treatment may have reduced effectiveness on Omicron.
“We don’t know much about this variant, and that is what is causing this uncertainty,” said Pierre Cléroux, vice-president of research and chief economist for the Business Development Bank of Canada. “The World Health Organization said it’s going to take two weeks before we have a better idea. So I think we’re going to have a volatile market for the next few weeks until we know more about the impact of this variant.”
Crude oil prices, which lost 13.1 per cent on Friday on fears that Omicron could reduce global demand, improved Monday but fell again on Tuesday, with the benchmark West Texas Intermediate touching its lowest level in three months. The January crude oil contract was down US$3.77 at US$66.18 per barrel and the January natural gas contract was down 29 cents at US$4.57 per mmBTU.
“Crude was 78 cents last week, now it’s 66, so that’s quite a drop,” Cléroux said. “But from experience, we know that the oil price can go down quite quickly. It can also go back up quite quickly.”
Another factor behind Tuesday’s market slump was the head of the U.S. Federal Reserve saying it will consider shutting off its support for financial markets sooner than expected. Fed Chief Jerome Powell told Congress the central bank may halt the billions of dollars of bond purchases it’s making every month “perhaps a few months sooner.”
But Cléroux said there are still a lot of positive market signals out there. He said it’s important to remember that prior to Friday’s sell-off, the TSX was at an all-time high. He also pointed out that Canada’s economy grew 5.4 per cent in the third quarter on an annualized basis, beating analyst expectations.
And when it comes to Omicron, Cléroux pointed out that COVID-19’s affect on the economy has been lessening over time. Vaccination rates in Canada are the highest among the G7, and much has been learned about public safety measures and managing the virus since the first wave in March of 2020.
“To me, although there’s a lot of unknown with this variant, I don’t think we can imagine that the impact will be the same as what we have experienced,” he said. “I think the impact on the economy will be much smaller.”
The Canadian dollar traded for 78.17 cents US compared with 78.34 cents US on Monday.
The February gold contract was down US$8.70 at US$1,776.50 an ounce and the March copper contract was down six cents at US$4.28 a pound.
This report by The Canadian Press was first published Nov. 30, 2021.
With files from The Associated Press
Companies in this story: (TSX:GSPTSE, TSX:CADUSD=X)
Amanda Stephenson, The Canadian Press