TSX unable to hold gains despite Talisman takeover surge

By Alastair Sharp

TORONTO (Reuters) - A surge in shares of takeover target Talisman Energy Inc (Toronto:TLM.TO - News) was not enough to keep Canada's main stock index in the black on Monday after falling more than 5 percent last week, with the broader resource-extraction industries weighing.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) ended lower after a strong start to the session, which one analyst pointed to as a sign investors are nervous.

"The interesting thing is the capitulation we saw in the middle of the day," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri. "It's a clear indication of a lack of conviction in the market."

Shares of Calgary-based Talisman, Canada's fifth-largest independent petroleum producer, jumped 18.5 percent to C$5.97, after Spanish oil major Repsol said it was considering a bid.

Talisman said it had been approached by a number of other parties, and investors said a bidding war was possible.

"I would think there's a good chance that there could be another bid or two actually come in here," John Kinsey, portfolio manager at Caldwell Securities.

The Toronto index ended 25.91 points, or 0.19 percent, at 13,705.14. Nineteen of the 20 heaviest weights were energy or mining stocks.

The index, battered by plunging oil prices that have hit domestic energy producers hard, lost more than 5 percent last week, its biggest week-long slip since September 2011.

Still, Edward Jones' Fehr said at these prices, and despite expectations of further volatility in commodity prices, investors could find winners in beaten-down resource stocks.

"It's reasonable for long-term investors to be opportunistic, even in the energy and materials space," he said.

Crude oil came under renewed selling pressure on Monday as the OPEC group of producers said it would not cut output. [O/R]

"Commodity prices are still weak and that is exacerbating the tax-loss selling. Things are going to pretty much close down by the end of this week," Caldwell's Kinsey said.

Canadian Natural Resources (Toronto:CNQ.TO - News) lost 4 percent to C$31.85 and Suncor Energy fell 2.4 percent to C$31.37. Major gold miners also declined, with Barrick Gold Corp (Toronto:ABX.TO - News) down 8.1 percent at C$12.21 and Goldcorp Inc (Toronto:G.TO - News) off 6.7 percent at C$20.33.

(Editing by Meredith Mazzilli and Lisa Shumaker)