August 31, 2009 / 9:20 PM / in 8 years

CANADA STOCKS-TSX sheds 1 pct on oil, China but ends Aug higher

* TSX down 1 percent at 10,868.21

* Energy, materials shares lead TSX lower

* China stock market selloff spreads to North America

* Index ends August higher, sixth straight monthly gain (Adds commentary, details)

By Ka Yan Ng

TORONTO, Aug 31 (Reuters) - Toronto’s main stock market index fell hard on Monday as oil and other key commodity prices dropped after a sharp selloff in Chinese equities undermined confidence in a global economic recovery, but the index still finished August with its sixth straight monthly gain.

The price of oil fell below $70 a barrel, and that pulled the index’s big oil and gas group down 2.1 percent. The mining-heavy materials group dropped 2.22 percent.

Among heavyweight decliners were Suncor Energy (SU.TO), down 2.7 percent at C$33.49, and miner Teck Resources TCKb.TO, which sank 4.1 percent to C$26.42.

China’s key stock index .SSEC fell 6.74 percent on Monday to a three-month closing low, logging its second-biggest monthly loss in 15 years [ID:nBJD002975].

China has been seen as a key driver of the global economic recovery and the stock market weakness rattled investor sentiment, knocking European and North American stock markets lower.

“Oil is taking a beating,” said Adrian Mastracci, president and portfolio manager at KCM Wealth Management Inc in Vancouver, British Columbia.

“But I think it started with China last night. It sends a bit of a signal that maybe not all is well in that part of the world.”

Domestic numbers were also somewhat disappointing. Canada’s economy shrank in the second quarter, but took a small step toward recovery in June. [ID:nN31431924]

The S&P/TSX composite index .GSPTSE fell 109.76 points, or 1 percent, to close at 10,868.21. At one point, the index shed more than 200 points.

It managed to reduce the losses, partly from strength in financials, which was the only sector of the index’s 10 main groups to eke out a gain on Monday.

The heavyweight financials staged a late-session run to end up 0.25 percent, led by Royal Bank of Canada (RY.TO), up 0.6 percent at C$56.45, and Bank of Montreal (BMO.TO), up 1.1 percent at C$53.

The index posted its sixth straight monthly gain, up 0.8 percent. It is up about 45 percent from the 2009 low it hit in March.

“Overall the markets are holding up well. Any kind of dip, money seems available. We’ve come back almost 100 points from the low of the day. I think it’s a pretty healthy market here,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.

“September tends to be a bad month but we’ll see what happens.”

After a massive rebound off five-year lows, some analysts warn Toronto’s main stock index looks vulnerable to a pullback when investors return from summer vacations and see valuations that may have gotten a bit out of hand. [ID:nN28382501]

$1=$1.10 Canadian Reporting by Ka Yan Ng; editing by Peter Galloway

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