Toronto's S&P/TSX composite index dropped another 1.8 per cent last week, closing at 14,473 on Friday, as the price of crude settled at a five-year low.
The January crude contract ended the week at US$65.84 a barrel on the New York Mercantile Exchange.
"My sense is the markets are continuing to digest what oil prices mean for various equity markets and various currencies," said David Wolf, a portfolio manager at Fidelity Investments.
"We've seen a pretty saw-toothed pattern on the TSX."
Exactly how detrimental lower crude prices could be to Canada is still in question, as economists weigh both the positive and negative aspects of an industry that's a large part of the economy.
Crude prices have tumbled about 38 per cent since mid-summer on lower demand and a glut of supply, due in large measure to greatly increased production in the U.S. Midwest.
Last week, a stronger U.S. dollar and the impact of Saudi Arabia reducing its January prices to U.S. and Asian customers last week further added to the weakness.
"Oil production is four times more important to Canada than the U.S. economy," wrote Bank of Montreal chief economist Doug Porter in a note.
"We continue to believe that the rally in the (U.S.) dollar is in its early days, as the greenback often acts like an ocean liner — once it changes direction it tends to move one way for years, and it has turned for the good."
Meanwhile, U.S. retail sales, due Friday, are expected to rise 0.3 per cent for November as lower gas prices affect overall figures, even as shoppers flooded into stores on Black Friday.
An RBC Capital Markets report suggests that falling gasoline prices are having a "non-trivial positive impact" on consumers, giving them an extra $36 billion in spending power during the fourth quarter compared to a year earlier.
Traders will also be focused on the eurozone where last week European Central Bank president Mario Draghi hinted that the central bank is ready to back a big monetary stimulus early next year.
"People may be starting to overdo it a little bit on the pessimism," said Wolf, who is a former adviser to the Bank of Canada.
"The ECB has already taken a number of measures which take quite a bit of time... to work their way through the system and through the economy."
In September, the ECB announced plans to buy covered bonds and other assets for two years to help stimulate the eurozone economy.
Wolf said those efforts have already started to show.
"You can already see the effect of those measures, with a pretty sharp drop in the euro over the past several months as well as significant decreases in term interest rates pretty much across the eurozone," he said.
"That's not going to help the economy immediately but it will over time provide some boost."
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