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TORONTO (Reuters) - Toronto's main stock index ended slightly lower on Monday as its energy and materials sectors fell on worries that credit tightening in China could sap demand for Canada's resources, outweighing a late-session rally in financial issues.
Some of the bigger decliners of the day were Canadian Natural Resources, down 2 percent at C$73.22, Suncor Energy, down 2.5 percent at C$31.04, and Cenovus Energy, which fell 1.8 percent to C$26.00.
Overall, the index's heavily weighted oil and gas group dropped 1.3 percent as the price of oil fell nearly 2 percent to below $80 a barrel.
China's central bank is expected to tighten its monetary policy as early as this week to temper its red-hot economy, spurring concern about the effect that could have on the global economy.
Profit-taking also played a role in the slide in the energy sector, said Bruce Latimer, a trader at Dundee Securities.
"(The price of oil) broke down below $80 and that triggered a little bit of selling," he said.
The index's materials group, home to miners and fertilizer companies, dropped 0.4 percent as Potash Corp of Saskatchewan fell 0.4 percent to C$127.51, and Teck Resources lost 1.4 percent to C$41.00.
The Toronto Stock Exchange's S&P/TSX composite index closed down 5.02 points, or 0.04 percent, at 12,008.80. The index's close above 12,000 on Friday was its highest finish in about 18 months.
Around midday on Monday, the index was down nearly 1 percent, but it bounced back as financials, which had been pretty flat most of the session, rallied to end up 0.9 percent.
Toronto-Dominion Bank rose 1.5 percent to C$73.36, Bank of Montreal gained 1.1 percent to C$60.40, and Royal Bank of Canada added 0.7 percent to C$58.84.
Financial issues "have, on a relative strength basis, been one of the better performers of the last few weeks, so I guess it's sort of a follow-through there -- in the absence of any specific news, you stick with what's been doing OK," said Paul Hand, managing director at RBC Capital Markets.
He said that low volume in the market as families vacation during the March school break in some parts of Canada added to the volatility on the market.
In company news, drugmaker Patheon Inc posted a bigger quarterly loss, hurt by lower revenue in its pharmaceutical development services unit. It said it sees higher revenue in fiscal 2010.
Looking ahead, the interest-rate setting committee of the U.S. Federal Reserve holds a one-day meeting on Tuesday in which it is widely expected to repeat its promise to keep borrowing costs exceptionally low for an extended period.
Japan's central bank also has a policy meeting this week.
Editing by Peter Galloway