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Canada’s main stock index extended losses on Monday, led by declines in energy and gold stocks amid fears of aggressive policy tightening by the Federal Reserve after data suggested red-hot U.S. inflation was yet to peak.

At 9:40 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 454.42 points, or 2.24%, at 19,820.4, and was set for its fourth consecutive session in losses.

The energy sector fell 4.2% as crude oil prices dropped following a flare-up in COVID-19 cases in Beijing that dented hopes of a Chinese demand rebound.

The materials sector, which includes precious and base metals miners and fertilizer companies, lost 2.7% as gold declined 1% after the dollar strengthened and Treasury yields rose on expectations of steeper rate hikes from the Fed.

Meanwhile, a market gauge measuring the gap between U.S. two-year Treasury yields and 10-year borrowing costs inverted on Monday for the first time since April, a phenomenon that often heralds economic recession.

The financials sector slipped 1.7%, while industrials fell 1.6%.

“The hangover from a higher-than-expected U.S. inflation reading is continuing to cause scissoring pain throughout the markets, as it extinguishes the hope the Federal Reserve might be able to take its foot off the pedal on interest rate rises,” said Russ Mould, investment director at AJ Bell.

This week, the focus will be on the Fed’s meeting, scheduled for June 14-15, with investors betting surging inflation may push the central bank to accelerate its withdrawal of pandemic-era policy support.

Shares of Cenovus Energy Inc fell 3.7% after it said it would buy British oil major BP Plc’s 50% stake in the Sunrise oil sands project in northern Alberta.

On the economic front, the ratio of Canadian household debt-to-income widened to 180.0% in the first quarter from an downwardly revised 179.1% in the fourth quarter, Statistics Canada. This matches the record level seen in the fourth quarter of 2018.

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