CANADA STOCKS-TSX declines on Ukraine concerns, drop in bank shares

Reuters

* TSX down 38.12 points, or 0.25 percent, at 15,520.05 * Eight of 10 main index sectors decline * Suncor, Canadian Natural slip with oil price By John Tilak TORONTO, Aug 29 (Reuters) - Canada's main stock index dropped on Friday as worries about increasing tensions in Ukraine and weakness in the financial sector offset positive economic data.

Government data showed the Canadian economy recorded better-than-expected growth, to an annualized 3.1 percent in the second quarter, from a downwardly revised 0.9 percent in the first quarter.

Investors looked for clarity about Ukraine's response to an offer from Russia about opening up a "humanitarian corridor" to allow the withdrawal of Ukrainian troops they have encircled.

Despite Friday's weakness, the benchmark TSX looked on track to record weekly and monthly gains. It is up about 14 percent this year.

Investors are not taking the geopolitical concerns seriously enough, said Matt Skipp, president of SW8 Asset Management. "The consensus trade seems to be, 'I can buy equities with immunity because the economy is improving and rates are staying depressed.'" "I would argue that you're at risk of a geopolitical event, whether it is Ukraine or the Middle East, that could have dire consequences for the global economy," he added.

The Canadian market is "extremely interest-rate sensitive" because of the high levels of consumer debt, Skipp said.

The Toronto Stock Exchange's S&P/TSX composite index was down 38.12 points, or 0.25 percent, at 15,520.05. Eight of the 10 main sectors on the index were in the red.

Financials, the index's most heavily weighted sector, gave back 0.6 percent, with Toronto Dominion Bank shedding 1.2 percent to C$56.69 and Royal Bank of Canada losing 0.4 percent to C$80.20.

While most of the major Canadian banks reported solid results earlier this week, fund managers said investors were booking profits after shares in the sector had a strong run ahead of the earnings season.

Shares of energy producers reflected higher oil prices. Suncor Energy Inc added 0.5 percent to C$44.44, and Canadian Natural Resources Ltd advanced 0.3 percent to C$46.88.

(Editing by Meredith Mazzilli)

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