Toronto market falls by most in one year on virus variant fears

Key points:
  • TSX ends down 487.28 points, or 2.25%, at 21,125.90
  • Energy group falls 5.9%; oil settles 13.1% lower
  • Air Canada slides 8.9%
  • Financials decline 1.9%; materials end down 2%

Canada's main stock index on Friday posted its biggest decline in more than one year, weighed by a sharp decline in energy shares, as investors worried that a possibly vaccine-resistant coronavirus variant could hinder the global economic recovery.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) ended down 487.28 points, or 2.25%, at 21,125.90, its biggest decline since October 2020.

U.S. markets also slumped, with volumes thinner than usual in a shortened post-Thanksgiving holiday session.

The European Union and Britain were among those tightening border controls as researchers sought to establish if the variant, discovered in South Africa, was vaccine resistant.

"Global stocks are under pressure driven by fears that a new COVID-19 variant identified in South Africa could disrupt the economic recovery," said Angelo Kourkafas, investment strategist at Edward Jones. "Given the uncertainty and because equities have had a very strong year so far, the initial reaction from investors is to cut risk and gravitate towards safe-haven assets like bonds."

Canada's 10-year yield tumbled 18.5 basis points to 1.579% as investors dialed back expectations for Bank of Canada interest rate hikes next year. (BOCWATCH)

For the week, the TSX was down nearly 2%. It was the second straight weekly decline for the index, interrupting a record-breaking rally.

The TSX has climbed 21.2% since the start of the year.

"Our initial take is that while the new variant can lead to more travel restrictions and a step back in the global reopening, it is unlikely to derail the bull market," Kourkafas said.

The energy group on Friday slumped 5.9% as crude oil prices settled 13.1% lower.

Travel-related stocks were also hit particularly hard, with Air Canada (AC) ending down 8.9%.

The heavily weighted financials group fell 1.9%, while the materials group, which includes precious and base metals miners and fertilizer companies, was down 2%.

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