The Toronto stock market was lower Monday, adding to steep losses last week amid concerns about emerging markets and the impact of U.S. monetary policy.
The S&P/TSX composite index dropped 39.19 points to 13,678.57 led by weakness in gold and financial stocks.
Traders also looked to Wednesday's interest rate announcement by the U.S. Federal Reserve to see if the central bank will launch another round of cuts to its massive monthly bond purchases.
The Canadian dollar was up 0.25 of a cent to 90.56 cents (U.S.).
U.S. indexes were higher after New York markets also sustained steep losses at the end of last week as countries such as Turkey, Argentina, South Africa and Russia found their currencies under pressure.
The Dow Jones industrials gained 56.4 points to 15,935.51, helped along by a strong earnings report from industrial bellwether Caterpillar. The Nasdaq composite index gained 5.63 points to 4,133.8, while the S&P 500 index was ahead 5.46 points to 1,795.75.
The Fed started easing its bond purchases this month by US$10-billion to $75-billion. This latest round of quantitative easing had flooded emerging markets with cheap money but now those funds are exiting those areas, in turn putting severe pressure on currencies. The worry is the contagion could spread to other markets.
Analysts expect the Fed to further taper its purchases by another $10-billion a month.
Investors were particularly focused on China last week after a widely watched purchasing managers index showed the manufacturing sector of the world's No. 2 economy unexpectedly slipped into contraction during January.
Emerging market worries pushed the TSX down 1.23 per cent last week while the Dow industrials tumbled 3.52 per cent.
At the same time, other analysts suggest that markets were vulnerable to a correction after Fed easing helped underpin a strong rally on many equity markets last year that left the S&P 500 alone up about 30 per cent for 2013.
It is also a heavy earnings week in both the U.S. and Canada this week.
On Monday, Caterpillar said it earned $1-billion, or $1.54 per share. That compares with $697-million, or $1.04 per share, a year earlier. Revenue declined 10 per cent to $14.4-billion from $16.08-billion. Analysts surveyed by FactSet expected earnings of $1.27 per share on revenue of $13.41-billion and its shares were ahead 6.7 per cent to $91.96.
In Canada, investors will take in earnings from companies including grocer Metro, fertiliser producer PotashCorp, tech firm Celestica and Canada's two big railways.
Canadian Pacific hands in results Wednesday while Canadian National Railways posts earnings Thursday. Analysts expect results from both railroads to have been impacted by fierce winter weather across much of the country. However, they also expect CN and CP to have a positive 2014 with volume growth helped along by increasing crude oil shipments.
The gold sector led decliners, down 1.2 per cent while February bullion was off $3.40 to $1,260.90 (U.S.) an ounce. Barrick Gold faded 27 cents to $20.78 (Canadian) while Kinross Gold declined 14 cents to $5.01.
The financial sector was down 0.6 per cent with Manulife Financial shed 21 cents to $20.65 while Scotiabank gave back 63 cents to $62.42.
March copper was down a cent at $3.27 (U.S.) a pound and the base metals group slipped 0.15 per cent. Lundin Mining dipped six cents to $4.83.
The market found some minor lift from consumer staples and tech stocks.
In other corporate news, Hudson's Bay Co. is selling properties that house its Toronto flagship store and executive offices to Cadillac Fairview, which operates the neighbouring Toronto Eaton Centre, in a sale-and-leaseback deal valued at $650-million. HBC also says its recently acquired Saks Fifth Avenue subsidiary will open a full-service store at the Queen and Yonge location and share space with its existing Hudson's Bay store. HBC shares gained 41 cents to $17.10.
It could be several days before about 4,000 people in municipalities south of Winnipeg will get their natural gas feeds back. Natural gas service was interrupted Saturday following a huge explosion at a TransCanada Pipelines valve site near St. Pierre-Jolys. The explosion prevented the company from supplying natural gas to Manitoba Hydro. The companies are still working on restoring gas supplies to customers. TransCanada shares rose 10 cents to $48.54.
On the economic front, investors will digest the latest growth figures from Canada and the U.S. during the week.
Statistics Canada is expected to report Friday that gross domestic product grew by 0.2 per cent in November amid rising manufacturing sales. That would be a slight dip from 0.3 per cent GDP growth in October.
In the U.S., it is expected that data out Thursday will show fourth-quarter economic growth came in at an annualized pace of 3.2 per cent, following a 4.1 per cent rise in the previous quarter.
European bourses were mixed with London's FTSE 100 down 2.82 per cent, Frankfurt's DAX dipped 0.1 per cent and the Paris CAC 40 gained 0.14 per cent.