The resource-heavy S&P/TSX composite index dropped 49.02 points to 15,482.56.
The Canadian dollar was ahead 0.36 of a cent to 90.5 cents US.
U.S. markets were uneven with the Dow Jones industrials up 43.63 points to 17,031.14, while the Nasdaq was down 48.7 points at 4,518.9 and the S&P 500 index slipped 1.41 points to 1,984.13.
Data showed that Chinese industrial production decelerated markedly in August to just a 6.9 per cent rise from a year earlier. It was the slowest growth since the 2008-09 financial crisis and left markets wondering if China's economy can reach the 7.5 per cent growth level targeted by the Chinese government.
"Many depend on China to set the pace of what’s going to happen with copper and energy," said Allan Small, senior adviser at HollisWealth.
"So, if there is a noticeable slowdown, obviously that will hurt the commodity sector and our economy in Canada will be affected by it."
The base metals sector was the biggest TSX loser, down 1.77 per cent as the weak Chinese data pushed December copper down two cents to US$3.09 a pound. First Quantum Minerals (TSX:FM) gave back 96 cents to C$23.16.
The U.S. Federal Reserve was also in focus with traders curious to see if the central bank drops a hint that it could raise interest rates sooner than mid-2015, when it is generally expected that short-term rates will start to head up from near zero, where they have been since the financial collapse.
They will be looking at the Fed's statement Wednesday to see if there has been a change in key language. For some time, the Fed has reassured markets that "it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends."
Markets will look to see if the Fed drops the words "considerable time."
"Is it going to be first quarter, second quarter, third quarter — I think the consensus is somewhere middle of next year," Small said.
"But we’re splitting hairs here. At the end of the day, rates are going higher sometime next year and we need to start to be prepared for that."
The great bit of uncertainty on markets this week is coming from the U.K. as traders look to Thursday and the referendum on Scottish independence. A Yes vote would result in huge complications from currency to membership in the European Union and NATO.
In corporate news, Microsoft will acquire Stockholm-based game developer Mojang, the maker of Minecraft, for US$2.5 billion. Minecraft, which lets users build and explore a virtual world, has been downloaded 100 million times on PCs alone since its launch in 2009. Microsoft lost 45 cents to $46.24.
Air Canada is moving to begin contract negotiations with its pilots union early in hopes of avoiding the acrimony that marked the last round talks that ended up being eventually settled by a federal arbitrator. Its shares (TSX:AC.B) jumped 57 cents or 6.7 per cent to $9.05.
Elsewhere on the TSX, auto parts makers help push the consumer discretionary sector down 1.17 per cent with Magna International (TSX:MG) losing $3.61 to $118.97.
The energy sector was ahead 0.25 per cent as October crude in New York gained 65 cents to US$92.92.
The gold sector was up 0.1 per cent as December bullion advanced $3.60 to US$1,235.10 an ounce.