TSX falls with oil as energy, high-yielding stocks decline

By Fergal Smith

TORONTO (Reuters) - Canada's benchmark stock index retreated on Monday as oil prices fell and heavyweight energy and financial shares lost ground, while the prospect of higher U.S. interest rates pressured defensive sectors, such as telecoms.

That sector fell 0.9 percent, while the utilities group, another high-yielding sector, lost 0.4 percent.

"It is all the yield names ... because the Fed is raising rates and it's moving towards normalization," said Noman Ali, senior portfolio manager at Manulife Asset Management.

"They are less attractive when overall yields are going higher elsewhere."

The financials group, which has benefited from the prospect of higher yields, also lost ground, falling 0.5 percent.

"Banks' selling practices have been under a lot of scrutiny and there is risk that regulators will pay more attention to this and it might affect their overall Canadian business growth prospects," Ali said.

The energy group also declined 0.5 percent, pressured by lower oil prices. U.S. crude prices settled 56 cents lower at $48.22 a barrel as investors grappled with growing U.S. oil output and high inventories.

Transcanada Corp (Toronto:TRP.TO - News) has secured shippers' commitments for a pipeline associated with Malaysian state-owned oil company Petronas' pending Pacific NorthWest liquefied natural gas terminal in western Canada, the company said.

Its shares fell 0.4 percent to C$60.94.

The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) closed down 48.17 points, or 0.31 percent, at 15,442.32.

Just two of the index's 10 main groups ended higher. The materials group, which includes precious and base metals miners and fertilizer companies, added 0.9 percent.

Dominion Diamond Corp (Toronto:DDC.TO - News) jumped more than 23 percent to C$16.27 after Washington Companies said on Sunday it had previously made a proposal to acquire the mining company for $13.50 a share.

Barrick Gold (Toronto:ABX.TO - News), the world's largest gold producer, rose 1.3 percent to C$25.46 as gold prices scaled a two-week peak.

Gold rose and the U.S. dollar and bond yields fell after a weekend G20 summit dominated by the U.S. administration's protectionist stance on global trade.

Canada's finance minister will give an update on the deficit when he presents the federal budget on Wednesday.

Businesses fear higher capital gains taxes would harm competitiveness just as U.S. rivals benefit from a break in taxes and regulation under President Donald Trump.

Canadian wholesale trade in January unexpectedly jumped 3.3 percent, its biggest monthly advance in more than seven years.

(Additional reporting by Alastair Sharp; Editing by Meredith Mazzilli and James Dalgleish)