* TSX index falls 1.6 pct to end four-session rally
* Fears of a global swine flu pandemic grow
* Oil and gas sector drops 2.4 percent (Adds details)
By Ka Yan Ng
TORONTO, April 27 (Reuters) - Toronto's main stock index fell 1.6 percent on Monday, breaking a four-session rally, as fears of an international swine flu outbreak rattled commodity prices, dampening hopes for an economic recovery.
Resource-related issues, which make up about 40 percent of the overall TSX index, were hit hardest by worries that the already-fragile world economy could be further damaged if a swine flu outbreak in Mexico turns out to be the start of a global pandemic. [ID:nLR259704]
Flu fears may nag for some time, analysts said, but it is too soon to predict the impact on markets, which have been rising on improving sentiment of the global economy.
"If people are convinced it's going to be a long period of time, then all bets are off. But at this point in time, it's still relatively early," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
The oil and gas sector dropped 2.4 percent as the price of crude fell more than 2 percent to above $50 a barrel, partly because of worries the flu outbreak could cut back on air travel, lowering demand.
EnCana (ECA.TO) was the top energy player that dragged on the index, falling 2.53 percent to C$53.88.
The materials group lost 2 percent. Even typically safe-haven gold stocks came under pressure as the price of the precious metal slipped as the firmer U.S. dollar prompted profit-taking. [ID:nLR139073]
Nine of the index's 10 main sectors ended lower, with the exception of the consumer staples group, which rose 1 percent as drug store chain Jean Coutu Group PJCa.TO reported a wider fourth-quarter loss but said it planned to increase the size of its stores. [ID:nN27512598]
Jean Coutu rose 2.75 percent to C$8.60.
The S&P/TSX composite index .GSPTSE finished down 154.68 points, or 1.62 percent, at 9,394.80. It had fallen more than 2 percent shortly after market open. The S&P/TSX 60 was off 1.67 percent at 569.28.
Despite fears of a possible pandemic, the drop in the TSX was not seen as especially worrisome, given that the index had begun the session up nearly 26 percent over the past seven weeks.
"I would have thought that if there was a real bear tone to the market we'd be more down than this. I still think there's a healthy undertone to the market," said Nakamoto.
"In this day and age of volatility, this isn't a huge down."
Financials were also hit, as nervousness picked up ahead of what a government stress test of major U.S. financial institutions might reveal in May. Even though Canadian banks are thought to be the world's soundest, they have often taken trading cues from international banks during the global financial crisis.
Worries that travel would be hit hard by the flu fears put pressure on Canada's airline stocks. Holiday travel company Transat AT (TRZ.TO), which numbers Mexico among its destinations, fell 10 percent to C$10.75, while scheduled carrier WestJet (WJA.TO) lost 5 percent to C$12.12.
$1=$1.22 Canadian Editing by Rob Wilson