TSX plays defense as oil price falls to near 2009 low

By Alastair Sharp

TORONTO (Reuters) - Canada's main stock index retreated on Monday, with heavyweight energy and banking stocks reacting negatively to a fall in the price of U.S. crude to near a 2009 low and disappointing data from Japan and New York.

Gains among gold miners limited the overall losses, with the Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) ending the day down 26.35 points, or 0.18 percent, at 14,251.53. Six of its 10 main sectors declined.

The energy sector fell 1.8 percent, with Suncor Energy Inc (Toronto:SU.TO - News) down 1.8 percent at C$36.60, as U.S. crude prices fell 1.5 percent to $41.87 a barrel and Brent crude lost 0.9 percent to $48.74. [O/R]

"It's in a very nervous place right now, if it (the price of oil) breaks down a couple more dollars it could be very, very ugly," said John Kinsey, a portfolio manager at Caldwell Securities.

Crude slipped after Japan said its economy shrank in the second quarter, while China's slowing growth is also causing concern.

Meanwhile, manufacturing activity in New York state plunged in August to its weakest since 2009.

The United States is by far Canada's largest trading partner and investors hope recovery south of the border stimulates activity here.

"I do think our economy is weak. There's a lot of problems," Kinsey said.

Financial stocks also pressured the index, with Royal Bank of Canada (Toronto:RY.TO - News) falling 0.7 percent to C$75.43 and Bank of Montreal (Toronto:BMO.TO - News) down 1 percent at C$72.18. The overall financials group, which accounts for more than a fifth of the index's weight, slipped 0.6 percent.

Kinsey said Canadian banks are being targeted by foreign investors worried about exposure to the country's energy industry and risk from a possible housing bubble, while many Canadian investors are compelled to hold them due to their size relative to the overall market.

Gold miners were among the biggest gainers, as investors took more defensive positions amid economic uncertainty, with Goldcorp Inc (Toronto:G.TO - News) up 4.3 percent to C$19.48 and Barrick Gold Corp (Toronto:ABX.TO - News) advancing 2.3 percent to C$10.30.

"We are getting some defensive capital flows again and some of that is going back into gold, with people getting worried about economies in China and Japan and even in Europe," said Colin Cieszynski, a senior market analyst at CMC Markets Canada.

"It's interesting because after materials, the next three sectors in terms of performance today on the TSX are healthcare, telecom and utilities, which are the defensive sectors," Cieszynski said.

(Editing by James Dalgleish and Lisa Shumaker)