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Commodity-linked stocks drag Toronto market lower

The facade of the original Toronto Stock Exchange building is seen in Toronto

By Fergal Smith

(Reuters) -Canada's main stock index fell on Monday, weighed by declines for energy and mining shares as investors turned more cautious after sharp gains in recent weeks.

The Toronto Stock Exchange's S&P/TSX composite index ended down 42.66 points, or 0.2%, at 20,410.21, after posting on Friday its highest closing level in two and a half months.

"We are shifting from overbought conditions to taking a little bit of profit and moving to some defensives," said Philip Petursson, chief investment strategist at IG Wealth Management

The energy sector fell 1.6% as the price of oil settled 1.4% lower at $73.04 a barrel, with traders taking a wait-and-see attitude about plans by OPEC and its allies to cut production in the first quarter.

The materials group, which includes precious and base metals miners and fertilizer companies, also lost 1.6% as gold pulled back from an all-time high. Gold was down 2.1% at about $2,028 per ounce.

In contrast, the consumer staples sector, which is seen as defensive due to its composition of companies that produce predictable cash flows, added 0.4%, while financials ended up 0.1%. The sector was building on gains last week when Canada's six major banks reported earnings.

"The banks have been very conservative in their loan loss provisioning," Petursson said. "Valuation is attractive, yields are attractive, so I think you could see banks being a little bit more of a defensive play."

Among the stocks that performed best was Nuvei Corp. Its shares gained 6.3% after the fintech company entered into a global payments partnership with Microsoft Corp.

(Reporting by Fergal Smith in Toronto and Shashwat Chauhan in Bengaluru; Editing by Shilpi Majumdar and Marguerita Choy)