TORONTO – The Toronto stock market looked set to add to last week’s sharp losses Monday with traders discouraged by U.S. Federal Reserve’s readiness to cut back on stimulus and another round of worry about the pace of China’s economic rebound.

The Canadian dollar continued to feel the pressure of a rising greenback, falling 0.66 of a cent to 94.98 cents US, its lowest level since early October, 2011.

U.S. futures indicated a big drop at the open with the Dow Jones industrial futures down 145 points to 14,566 on top of a 1.8 per cent cent slide last week, the Nasdaq futures gave back 24 points to 2,841 and the S&P 500 futures lost 17.75 points to 1,566.25.

The TSX fell 1.57 per cent last week after Fed chairman Ben Bernanke signalled that the central bank could start to wind up its bond buying program this year and wrap it up by the middle of next year.

Huge amounts of stimulus from central banks have played a huge role in the economic recovery since the 2008 financial collapse by keeping long term rates low. It has also been a huge support for stock markets.

China also pressured markets last week after a private survey showed manufacturing in China contracted at a faster pace in June to a nine-month low. Moreover, Chinese economic growth slowed unexpectedly in the first quarter to 7.7 per cent and forecasters have cut their growth outlook for the year.

China was also in focus Monday after China allowed commercial lending rates to soar in a move analysts said was aimed at curbing a booming underground lending industry.

Analysts say the spike late Thursday in the country’s interbank lending rate to over 13 per cent was part of an effort to trim off-balance-sheet lending that could threaten the financial stability of the world’s second-largest economy.<

But markets feared the move could also hurt economic growth. China’s major state-owned banks are unwilling to lend to any but their biggest clients, so the vast majority of smaller businesses must rely on informal lending.

Mainland China’s Shanghai Composite Index plummeted five per cent to a four-year low.

Indications that the Fed will ease up on its US$85 billion of bond purchases each month continued to send the U.S. dollar and bond yields higher. The benchmark 10-year Treasury rose to 2.636 per cent, close to a two year high and up from 2.25 per cent prior to Bernanke’s news conference last Wednesday. The yield had been as low as 1.6 per cent at the beginning of May.

The stronger greenback also helped depress commodity prices, along with demand concerns. That is because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals which are dollar-denominated.

The August crude contract on the New York Mercantile Exchange slipped 14 cents to US$93.55 a barrel.

Traders also looking at what damage heavy rains and flooding will have on Alberta’s energy business.

Enbridge Inc. (TSX:ENB) is working to contain and clean up a weekend spill of synthetic crude into a wetland area and small lake in northern Alberta. Enbridge also shut other pipelines in the area as a precaution, including the Athabasca and Waupisoo pipelines, as the province grapples with major flooding, including in the city of Calgary where Enbridge has its head office.

Enbridge said in its initial assessment that unusually heavy rains may have resulted in a ground movement that affected the pipeline, which is part of its Athabasca network.

July copper on the Nymex crept closer to the US$3 level, down another eight cents to $3.02 a pound.

Gold prices also continued to tumble, down $8.60 to US$1,283.40 an ounce. Bullion fell to three-year lows last week in the wake of the indication by the Fed of lower bond purchases.

Elsewhere in the gold sector, slumping gold prices have reportedly resulted in Barrick Gold Corp. (TSX:ABX) intensifying its downsizing plan. Reuters reported the miner will lay off up to a third of its corporate staff at its headquarters in Toronto and other offices. Barrick is also dealing with operational and regulatory issues at some of its mines and projects.

Meanwhile, Goldman Sachs cut its outlook on the metal for 2013 and 2014, citing growing price risks from an improving U.S. economic picture. The bank now expects gold to end this year at $1,300 an ounce, down 9.4 per cent on its previous forecast. Goldman Sachs sees gold ending 2014 at $1,050 an ounce, down 17.3 per cent on its earlier outlook.

Elsewhere in Asia, Hong Kong’s Hang Seng fell 2.2 per cent, Japan’s Nikkei 225 index, the regional heavyweight, fell 1.3 per cent, South Korea’s Kospi lost 1.3 per cent while Australia’s S&P/ASX 200 shed 1.5 per cent.

European bourses also registered sharp losses as London’s FTSE 100 dropped two per cent, Frankfurt’s DAX lost one per cent while the Paris CAC 40 fell 1.84 per cent.