June 9, 2008 / 1:06 PM / 11 years ago

Toronto stocks to stumble on oil, economic worries

*Crude oil, other commodities drop

*Lingering economic concern over high energy costs

*Resource-heavy TSX still near record high

TORONTO, June 9 (Reuters) - The Toronto Stock Exchange’s main index was seen cooling on Monday, taking a cue from commodities and hampered by worries over the effect that rising energy costs will have on the economy.

Crude oil — whose recent rise has rattled world markets — slipped on Monday along with gold, natural gas and most base metals.

That usually signals a weak start for the resource-heavy index, which has climbed nearly 18 percent since mid-March as oil and other commodities have risen, attracting new interest in Canadian producers.

Resource shares propelled the TSX to a record high midway through the last session, before the skyward surge in crude futures bolstered worries about lofty fuel costs hurting corporate profits and economic activity.

The TSX ended slightly lower, and could cool further on Monday as crude futures slipped C$2.24 to C$136.30.

“If oil and gold keep going up they will drive the Canadian market, but we are in a recession in Canada,” said Douglas Davis, president at Davis-Rea.

Davis anticipates economic growth will be negative in the second quarter, which would signal the country has been in a recession since the beginning of the year.

“We may go in the direction of oil, but in terms of how we are doing — it’s not very well,” he said.

Also in economic news, new housing starts rose more than expected last month, which may be taken as good news for stock investors worried about a cooling Canadian economy. For details, see: [nN09456243]

Back in the oil sector, Imperial Oil (IMO.TO) can now go ahead with its C$8-billion ($7.8-billion) Kearl oil sands project after the Canadian government provided all necessary approvals. For details, see: [nN06297252]

The S&P/TSX composite index .GSPTSE starts the day at 14,969.55 after dipping 13.36 points, or 0.1 percent in the previous session.

$1=$1.02 Canadian Reporting by Jonathan Spicer; Editing by Bernadette Baum

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