Canada's resource-heavy stock index hit its lowest in five weeks on Thursday, after weakness in crude oil and gold prices prompted energy and material stocks to extend losses.

At 10:41 a.m. ET (1441 GMT), the Toronto Stock Exchange's S&P/TSX composite index was down 266.3 points, or 1.38%, at 19,064.51.

The energy sector dropped 2% as oil prices tumbled by the same percentage as new COVID-19 lockdown measures in China added to worries that high inflation and interest rate hikes are denting fuel demand.

Meanwhile, data showed Canadian manufacturing activity contracted in August for the first time since the early stages of the pandemic, amid stronger declines in output and new orders, and the first drop in employment in two years.

"We still have probably four to five weeks to try to figure out where the bottom is and to retest the June lows," Arthur Salzer, executive director and chief executive officer at Northland Wealth Management said.

"The lack of selling from the government's petroleum reserves will stabilize the price and after that the price of oil and gas will start to rise again, and probably substantially over the next 18 months to two or three years."

Gold prices briefly slid below $1,700 for the first time in six weeks causing the TSX's materials sector, which includes precious and base metals miners and fertilizer companies, to lose 2.5%.

The financials sector slipped 1.5%. The industrials sector fell 0.9%.

The selloff in Toronto stocks which started on Friday, after U.S. Federal Reserve chief Jerome Powell warned of aggressive rate hikes, has brought the benchmark index closer to its July lows.

Investors are concerned that monetary policymakers' laser focus on bringing down record-high inflation at the cost of a slowdown in economic growth might induce a potential recession.

Traders are expecting an about 56% chance of a 75-bps-hike by the Bank of Canada at its policy meeting next week.

(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Aditya Soni and Shailesh Kuber)