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Canada’s main stock index lost ground Monday but still fared better than U.S. markets that dropped sharply after China announced retaliatory tariffs in response to action by the U.S. administration.

Investors’ search for safety pushed up gold prices and shares in the materials sector, helping to trim some of the deep losses experienced across the border.

“You would expect that the TSX would get caught up in a global market sell off but certainly it’s not down as much as some of the other markets are today,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

The S&P/TSX composite index closed down 104.14 points or 0.64% to 16,193.41 after hitting an intraday low of 16,111.26.

U.S. markets endured their worst day since early January.

In New York, the Dow Jones industrial average was down 617.38 points at 25,324.99, just short of the 660-point drop on Jan. 3. The S&P 500 index was down 69.53 points or 2.5% at 2,811.87, while the Nasdaq composite was down 269.92 points or 3.4% at 7,647.02.

Markets have faced volatility since last week over trade talks between the world’s two largest economies, and while they largely recovered each day last week from deep early losses, there was little to cheer about on Monday.

“When you start getting into trade wars, investors start getting concerned that the gears of the global economy might slow down and grind to a halt and it raises questions of could this cause a global recession, could this cause a slowdown in global trade, what does this mean for corporate earnings.”

China announced Monday that it will hike tariffs on US$60 billion worth of U.S. imports, starting June 1. That’s in retaliation to the U.S. raising tariffs on US$200 billion worth of Chinese goods to 25% from 10%.

U.S. President Donald Trump has publicly mused about adding the tariffs on some US$350-billion worth of additional Chinese imports.

Cieszynski said a further escalation of the trade war risks precipitating a bear market.

“At least we’re looking at a correction,” he said in an interview.

“The risk with things like this is that somebody miscalculates, makes a political miscalculation and then the whole thing falls apart.”

Analysts anticipate volatility to remain until signs of a deal are forthcoming.

The risk-off day saw a flight to safety sectors led by real estate, utilities, materials and telecommunications.

Materials rose as the June gold contract was up US$14.40 at US$1,301.80 an ounce and the July copper contract was down US5.55¢ at US$2.72 a pound.

Industrials gained as WestJet Airlines shares closed up nearly 60% after Onex Corp. announced a friendly $3.5-billion takeover bid for the airline, plus assuming $1.5 billion of debt.

The biggest losers on the day were the cannabis-heavy health-care sector, along with consumer discretionary, energy, technology and financial sectors.

The June crude contract was down US62¢ at US$61.04 per barrel and the June natural gas contract was up US0.2¢ at US$2.62 per mmBTU.

The Canadian dollar traded at an average of US74.33¢ compared with an average of US74.53¢ on Friday.