Canada’s main stock index fell on Monday, tracking crude oil prices, while shares of Home Capital Group jumped after the mortgage lender agreed to be taken private in a $1.27 billion deal.
Global markets tumbled after China’s capital warned that it was facing its most severe test of the COVID-19 pandemic, shutting businesses and schools in hard-hit districts and tightening rules for entering the city.
At 10:33 a.m. ET (1533 GMT), the Toronto Stock Exchange’s S&P/TSX composite index fell 147.38 points, or 0.74%, to 19,833.53.
The energy sector fell 4.5% as oil futures took a beating after the Wall Street Journal reported that Saudi Arabia and other OPEC oil producers are discussing an output increase.
“This morning it is all about the downward slide of oil,” said Barry Schwartz, portfolio manager at Baskin Financial Services.
C$ hits 11-day low as China COVID curbs clip sentiment
“The natural inclination is that tightening in China will hit flow of goods and result in a deceleration global economy as we enter 2023.”
The S&P 500 and the Nasdaq opened lower on demand concerns out of China, while a jump in Disney’s shares following Bob Iger’s surprise comeback as chief executive supported the Dow.
Canada’s Home Capital Group Inc soared 56.9% after the mortgage lender said it would be acquired by Smith Financial Corp.
“Smith sees a long term opportunity since Canada is anticipating over half a million immigrants who may not be qualified for mortgages from banks and will look to alternative lenders like Home Capital,” Schwartz added.
This deal is seen as a breakthrough for Home Capital, according to analysts who believe the stock’s price has been depressed since a 2015 independent investigation found that certain brokerages that the firm had contracts with had falsified information about borrowers’ incomes.
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