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By Claire Sibonney

TORONTO (Reuters) - Weak U.S. manufacturing data andcautious remarks from the U.S. Federal Reserve pressuredheavyweight financial shares and tugged Toronto's main stockindex slightly lower Friday.

The financials declined 0.7 percent, with insurers feelingthe brunt of the drop. Sun Life Financial fell 1.9percent to C$26.40, and Manulife Financial dropped 1.7percent to C$12.76.

Hurting the insurers were comments from William Dudley,president of the New York Fed, who said U.S. growth has beengenerally disappointing, which boosted the case for continuedlow U.S. interest rates and other Fed actions to drive downborrowing costs.

Continued low interest rates hurt the returns insurers geton their large investments in fixed-return securities.

Also pulling down the Toronto index was U.S. data thatshowed factory activity slipped and inflation remained subduedin August.

Supporting the index was stronger-than-expected Chinesemanufacturing data, which lit a fire under commodity prices andlifted the demand outlook for Canada's key exports.

The index's energy group, up 1.1 percent, and itsbase-metals subsector, up 1.5 percent, led the gainers as oilrose closer to $82 a barrel and copper rallied to its firmestlevel in more than two years.

Oil company Canadian Natural Resources jumped 3.3percent to C$36.77 and base-metals miner Teck Resources advanced 2.4 percent to C$43.35.

Gold miner Barrick Gold added 0.8 percent toC$47.94, as gold extended its record-breaking rally after theFed comments brightened the outlook for the safe-haven metal asan alternative investment to the U.S. dollar.

The Toronto Stock Exchange's S&P/TSX composite index closed down 5.57 points at 12,363.08. Six of theindex's 10 main groups were lower. It ended the week 1.3percent stronger.

Early in the day the index rose to its highest level sinceSeptember 2008, but the market then took a breather afternotching big gains in September and in the third quarter.

"There's a lot to be positive about but there's a lot to becautious about because the market is up a lot," said IanNakamoto, director of research at MacDougall, MacDougall &MacTier.

He noted that "October seems to be a spooky month," duringwhich the biggest stock market crashes in history haveoccurred.

Research In Motion, up 2.2 percent at C$51.20, wasin the spotlight as the Indian government said it has manualaccess to chat communication on BlackBerry messenger servicesand expects to get automated access from Jan. 1

Alimentation Couche-Tard was down 2.4 percent atC$22.47. It abandoned its $2 billion hostile takeover bid forCasey's General Stores on Thursday, nearly half a yearafter it made its initial offer for the U.S. convenience storechain

($1=$1.02 Canadian) (Editing by Peter Galloway)