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* Index climbs with support from resource sectors
* Duvernay jumps after bid from Royal Dutch Shell
* Financials hurt by U.S. bank worries
By Leah Schnurr
TORONTO, July 14 (Reuters) - The Toronto Stock Exchange's main index ended slightly higher on Monday as acquisition activity in the energy sector helped offset slumping financials amid nervousness over more casualties from the credit crunch.
Duvernay Oil DDV.TO was the biggest percentage gainer after Royal Dutch Shell (RDSa.L) agreed to buy the Calgary-based company for about C$5.9 billion ($5.9 billion), in a cash offer of C$83 a share, or 42 percent above its Friday close. That suggested shares in the energy shares were undervalued.
But investor jitters continued to undermine the market, as initial optimism over a proposed U.S. government rescue plan for mortgage finance giants Fannie Mae FNM.N and Freddie Mac FRE.N faded amid renewed fears for the health of the U.S. banking sector.
"It's a good step but we have not reached the last step as a solution to this unprecedented challenge that U.S. securities have to deal with," said Clement Gignac, chief economist and strategist at National Bank of Canada in Montreal.
The S&P/TSX composite index .GSPTSE closed up 32.19 points, or 0.23 percent, at 13,741.29 but just three of its 10 main sectors were higher.
The banks led the way down, sliding 3.2 percent. The sector, which has been beaten up in the wake of the slumping U.S. housing market and resultant credit squeeze, was also hurt by fresh worries in the wake of the collapse of mortgage lender IndyMac Bancorp IMB.N.
"In Canada, it is something we are not completely immune to," said Gignac. "If the U.S. recession shifts from a mild recession to a longer and deeper recession, unfortunately the Canadian economy and the banks will be effected."
The energy sector put on 2.6 percent, buoyed by Duvernay's advance. Shares of Duvernay soared C$23.56, or 40.3 percent, to C$82.00, while Canadian Natural Resources (CNQ.TO) was up C$4.34, or 4.7 percent, at C$96.84.
"The M&A activity provides a nice plus," said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc in Vancouver.
"It gives you a little perspective that there are some loans being made, there are some good covenants out there, and that's nice to see because we need a little bit of that comfort back in the market."
Gold producers lifted the materials sector 2.1 percent, while spot gold reached its highest level in nearly four months on worries over the stability of financial markets.
Consumer shares were knocked down by worries over the appetite for spending in the wake of soaring energy and fuel prices. The consumer discretionary and staples groups gave up 2.1 percent and 1.2 percent, respectively.
The telecoms group was down 1.4 percent, as companies were hurt in a broad sector downturn. Rogers Communications (RCIb.TO) was off 71 Canadian cents, or 1.9 percent, at C$36.50, and Telus Corp (T.TO) was down C$1.29, or 3.2 percent, at C$39.01.
Market volume was 413 million shares worth C$8.2 billion. Decliners outpaced advancers 855 to 694. The blue chip S&P/TSX 60 index .TSE60 closed up 1.56 point, or 0.19 percent, at 821.29.
In New York, stocks were also battered by worries over the health of the U.S. banking sector. The Dow Jones industrial average .DJI closed down 45.35 points, or 0.41 percent, at 11,055.19, and the Nasdaq Composite Index .IXIC slipped 26.21 points, or 1.17 percent, to 2,212.87. ($1=$1.01 Canadian) (Editing by Rob Wilson)