TSX nears 2016 high, banking and consumer shares shine

By Alastair Sharp

TORONTO (Reuters) - Canada's main stock index rose on Monday, led by banking and consumer shares as investors cheered U.S. economic strength, Japan's latest fiscal stimulus, and Britain settling on a new leader following last month's vote to leave the European Union.

The index is less than 90 points shy of the 14,450 level it peaked at in early June, and breaching that would put it at its highest since August last year.

The U.S. S&P 500 index meanwhile closed at a record high, on the back of Friday's blockbuster U.S. jobs data. [.N]

But with 31 Canadian stocks touching fresh 52-week highs and earnings and domestic economic growth not keeping up, some investment managers are taking a cautious view.

"We are preaching to our clients that at this point in the cycle, given valuations and earnings growth, that a conservative allocation within fixed income to equity is prudent at this time," said Macan Nia, director for capital markets and strategy at Manulife Investments.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) closed up 102.04 points, or 0.72 percent, at 14,361.88. Eight of its 10 main sectors gained, led by its heavyweight financial sector.

It hit 14,415.48 in earlier trade, within striking distance of its highest level so far this year of 14,450.91, notched on June 8.

The TSX's financials group, which accounts for 35 percent of the index's weight, gained 0.8 percent.

Consumer staple stocks rose 1.7 percent and consumer discretionary names added 1.6 percent.

Royal Bank of Canada (Toronto:RY.TO - News) rose 1.0 percent to C$78.11, Toronto-Dominion Bank (Toronto:TD.TO - News) advanced 0.8 percent to C$55.53 and Bank of Nova Scotia (Toronto:BNS.TO - News) added 0.9 percent to C$63.89.

The materials group, which includes precious and base metals miners and fertilizer companies, added 1.1 percent.

The energy group retreated 0.3 percent, with Canadian Natural Resources (Toronto:CNQ.TO - News) down 0.9 percent to C$39.93, as crude hit a 2-month low on glut fears. [O/R]

Deeply discounted prices for heavy crude from the heart of Alberta's oil sands look set to sink further, thanks to hundreds of thousands of barrels of new supply that will have difficulty finding space in crowded pipelines, traders say.

Thomson Reuters, parent company of Reuters News, advanced 2.1 percent to C$54.40 after it said it would sell its intellectual property and science business for $3.55 billion.

Meanwhile, shares in Mitel Networks Corp (Toronto:MNW.TO - News) fell 1.3 percent to C$9.25 after its deal to buy Polycom Inc was thwarted by a rival bid.

(Reporting by Alastair Sharp; Editing by Bernadette Baum and Diane Craft)