The S&P/TSX composite index tumbled 360.95 points to 14,392.7, paced by a 6.5 per cent drop in the energy sector. Oil in New York traded as low as US$49.95 a barrel before recovering somewhat to close down $2.65 to US$50.04. The drop continued the steady decline from summertime highs of US$107 a barrel as markets deal with a huge oversupply issue. A strengthening greenback also weighed on prices since a rising U.S. currency makes dollar-denominated crude more expensive to holders of other currencies.
The Canadian dollar closed up 0.09 of a cent to 85.11 cents U.S. It had earlier fallen to a 5 1/2 year low, touching 84.91 cents U.S.
U.S. indexes were deep in the red at the start of a busy week for economic data, capped on Friday by the release of the U.S. government's employment report for December.
The Dow Jones industrials dropped 164.82 points to 17,668.17, the Nasdaq shed 33.71 points to 4,693.1 while the S&P 500 index was 20.54 points lower to 2,037.66.
Commodity prices were also depressed as the U.S. currency strengthened and the euro fell to the lowest level since March 2006, amid fresh doubts as to Greece will exit the eurozone following elections later this month.
The greenback strengthened as traders weigh the outcome of upcoming elections in Greece that might be won by the anti-austerity Syriza party. Such a victory would raise doubts about whether the country will stick to the terms of its international bailout and stay in the euro bloc. Germany has warned Greece against reneging on the bailout conditions should Syriza win this month's general election.
Greek jitters helped push the euro down as low as US$1.1864 earlier Monday morning.
Elsewhere on the TSX, the base metals sector was down 3.5 per cent while March copper fell six cents to US$2.76 a pound.
Most sectors were lower with financials and industrials down 1.6 per cent.
The gold sector was the leading advancer, up one per cent as February bullion added $14.10 to US$1,200.30 an ounce.
On the U.S. economic calendar for this week, investors looked to the latest reports on auto sales during the day.
Later in the week, they will digest the minutes from last month's Federal Reserve meeting for indications of when the central bank might move to hike rates later this year.
Markets will also take in Canadian data including merchandise trade, housing starts and building permits.
But it is the latest readings on employment that will focus markets.
Economists expect that the American economy created about 240,000 jobs during December and that the jobless rate ticked slightly lower.
In Canada, it is expected Statistics Canada will report that the economy cranked out about 10,000 jobs, after losing a similar amount during November.
Traders also digested acquisition developments in the tech and energy sectors.
NeuLion, Inc. (TSX:NLN) has an agreement to acquire DivX LLC with a combination of shares and debt valued at US$62.5 million. The deal will combine two technology companies focused on delivering video content to Internet-enabled devices such as computers, smartphones and tablets. Neulion rose seven cents to $1.41.
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