*TSX sheds 0.4 percent, down second straight session
*Energy sector leads way down as oil tumbles below $64
*Top net loser Canadian Natural sinks 5.4 percent
(Adds quote, details)
By Jennifer Kwan
TORONTO, Nov 3 (Reuters) - The Toronto Stock Exchange's main index closed slightly lower on Monday as oil and gas issues retreated with the price of crude, which dropped on fears that global recession would erode demand.
Oil settled down $3.90 at $63.91 barrel on concerns that demand will continue to be curbed by economic slowdown, offsetting OPEC's move to reign in output. [ID:nSYD368172]
Also weighing on investor sentiment was weak U.S. manufacturing data [ID:nN03317969] and dismal auto sales figures [ID:nL3115304]
"Folks are just spooked by the potential duration and magnitude of the global economic recession," said Paul Taylor, chief investment officer at BMO Harris Investment Management Inc.
The S&P/TSX composite index .GSPTSE closed down 41.50 points, or 0.43 percent, at 9,721.26, on the first trading day in November, with three of its 10 main groups lower. The index logged a 16.9 percent drop in October.
The energy sector fell 3.7 percent with top net loser, Canadian Natural Resources (CNQ.TO), down 5.4 percent at C$57.51.
The materials sector shed 1.3 percent as metals gave up earlier gains. Kinross Gold K.TO was up 1 percent at C$12.68.
Hefty stocks that helped limit the index's fall were Manulife Financial (MFC.TO), up 8.3 percent at C$26.11, and Research In Motion RIM.TO, which rose 3.8 percent to C$63.36.
The index was in positive territory until midafternoon.
"There is no doubt that the market probably is significantly oversold in the short term," Taylor said.
"On the flip side, if we do get a relief rally the potential is that it will be short-lived because we do have strong fundamentals that suggests that, again, we're going to have an extended down cycle from an economic standpoint. There is no strong visibility on a sustainable rally."
The volatility on the market is a "recognition of how serious the recession is going to be in the U.S. and Western Europe," said Gavin Graham, director of investments at BMO Asset Management.
"It's obviously affecting the price of commodities, which is why Canada gets hit," he said.
In company news, trendy yoga retailer Lululemon Athletica LLL.TO was a top net loser, down 14 percent at C$14.60 after BMO Capital Markets downgraded the company to "underperform" from "market perform". [ID:nBNG418650]
Elsewhere, Silver Wheaton SLW.TO rose 3.1 percent to C$4.33 after it reported a higher quarterly profit. [ID:nN03519873]
Market volume was 508.2 million shares worth C$6.52 billion. Advancers outpaced decliners 890 to 638. The blue chip S&P/TSX 60 index .TSE60 closed 4.35 points lower, or 0.74 percent, at 586.93.
The Dow Jones industrial average .DJI fell 5.18 points, or 0.06 percent, at 9,319.83, while the Nasdaq Composite Index .IXIC ended up 5.38 points, or 0.31 percent, at 1,726.33. ($1=$1.18 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)