The Toronto Stock Exchange shed 329 points or two per cent of its value on Monday as oil prices continued their slide and a major U.S. investment bank said there is plenty more downside left.

The TSX composite index had earlier traded below the 14,000-point level before recovering a little late in the trading day to close at 14,144.17. It was the biggest one-day drop since April 2013. The sell-off came on the first day of trading after the index lost about two per cent last week.

'Investors are selling everything.'- David Cockfield, portfolio manager

Basically everything was lower, as banks, tech stocks and industrials joined commodities in sliding into the red. (The only exception was health care, which was clinging to a small gain on the day.)

The TSX is now at its lowest point since the middle of October, and Canada's benchmark stock index is now only up by just under four per cent since the start of the year. The Canadian dollar fell 0.38 of a cent to 87.09 cents US.

Germany Stock Market

Oil prices have tumbled from around $105 this summer to below $65 today, and stock markets heavy on energy shares are starting to follow suit. (The Associated Press)

"The psychology is extremely negative. We’re back into panic mode,” said David Cockfield, managing director and portfolio manager at Northland Wealth Management. “The market in Canada is becoming more and more irrational.

"People are selling because the market is down and they think it’s going to go down further,” he said. “They’re probably going to be right because they’re selling."

Cockfield, who is waiting on the sidelines until the dust settles, said the oil and gas sell-off has unnerved the market and now "investors are selling everything."

Bleak Chinese data prompts worries

One of the big catalysts was disappointing data out of China showing the country is buying less goods from overseas — and shipping out less to the rest of the world.

China's imports shrank unexpectedly in November, falling 6.7 per cent, while export growth slowed, fuelling concerns the world's second-largest economy could be facing a sharp slowdown.

China's crude oil imports rose nine per cent in November from October to 6.18 million barrels per day, suggesting the country may be boosting its reserves.

"If one looks at the overall economic indicators, they are all showing a picture of China which is stagnating rather than having strong growth," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.

That's bad news for a country like Canada, which has long been criticized for being heavily dependent on shipping  natural resources to the rest of the world.

Oil prices keep sliding lower, with Brent Crude for January down $2.95 at $66.12 a barrel at the close of trading at 4 p.m. ET, having fallen $2.30 to $66.77 US — its lowest since October 2009.

Oil was selling at $105 a barrel as recently as July, but the price has been falling ever since.

U.S. crude was down $2.86 at $62.99 a barrel. The U.S. contract, also known as West Texas Intermediate, touched $63.72 last week, its lowest since July 2009.

In a report dated Dec. 5, U.S. investment bank Morgan Stanley said oil prices could fall as low as $43 a barrel next year. 

"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015," Morgan Stanley analyst Adam Longson said.

"Given continued oversupply and still no sign yet that U.S. oil production starts to show any reaction, perhaps prices will continue to head lower," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

With files from Reuters