*TSX falls 70.28 points, or 0.59 percent, to 11,774.77
*Manulife, down 11.3 percent, weighs on TSX
*Five of TSX main sectors lower (Adds details, quote)
By Jennifer Kwan
TORONTO, Aug 5 (Reuters) - Toronto's main stock index closed lower on Thursday as financial shares dropped after Manulife Financial Corp (MFC.TO) posted a steep quarterly loss.
Manulife, Canada's largest life insurer, was the most heavily traded stock on the TSX and fell 11.3 percent to C$14.20. [ID:nN05256071]
Its big loss came after Sun Life Financial (SLF.TO), Canada's No. 3 insurer, said late on Wednesday that its net profit was cut by more than half by turbulent market conditions in the second quarter. [ID:nN04261095]
Sun Life was down 4.7 percent at C$27.27.
Analysts said the market's reaction to the results was a reflection of its fragility as it worries about the possibility of a double-dip recession.
"Any kind of news that points toward that, traders get nervous," said Aaron Fennell, senior market strategist at Lind-Waldock Canada.
"Traders are very sensitive to things like earnings, anything that can indicate financial firms are not able to generate profit."
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE finished the day down 70.28 points, or 0.59 percent, at 11,774.77. The index's financial group, down 2.2 percent, led the way lower.
Analysts said the TSX was also undermined by U.S. market sentiment, which was bruised on Thursday by disappointment over U.S. weekly jobless claims data. [.N] [ID:nN05245807]
Paul Taylor, chief investment officer at BMO Harris Investment Management Inc, said, however, that a transition to organic, jobs-related growth in the United States is on the way and that concerns about growth in China and the European sovereign debt crisis won't be great enough to derail economic recovery.
"With that as a backdrop we'll have a strong loonie and no surprise that we're seeing foreign interest in the Canadian equity market and we have the S&P/TSX looking like it has reason to retest the 12,000 mark," Taylor said.
Markets are now focused on the more comprehensive U.S. July jobs report and Canadian employment data for the same month, both due on Friday morning.
Other major decliners on Thursday included Suncor Energy (SU.TO), down 0.8 percent at C$34.18, and Teck Resources TCKb.TO, which dropped 3.7 percent to C$35.84.
Research In Motion RIM.TO fell 2.2 percent to C$53.06 after the BlackBerry maker faced more demands to open its smartphones to government scrutiny as Lebanon joined India, Saudi Arabia and the UAE in raising concerns over security. [ID:nN05199262]
Air Canada ACa.TO ACb.TO posted a quarterly net loss, hurt by foreign exchange. [ID:nN05162676] Its class A shares dropped 3.5 percent to C$2.22.
On the upside, Potash Corp (POT.TO) climbed 2.5 percent to C$115.97, and fellow fertilizer producer Agrium (AGU.TO) rose 1.5 percent to C$68.45 as Russia's worst drought in a century prompted the Russian government to ban grain exports for the first time in 11 years, which drove up grain prices. [ID:nN05144923]
The blue chip S&P/TSX 60 index .TSE60 closed 4.53 points, or 0.65 percent, lower at 687.22.
$1=$1.02 Canadian Reporting by Jennifer Kwan; editing by Peter Galloway