TORONTO (Bloomberg) — Canadian telephone and materials stocks including Telus advanced for a second day after take-over speculation was fanned by the acquisitions in the past week of BCE and Aur Resources."The driving force in the market is still M&A," said Greg Eckel, who helps oversee about C$1.3 billion as a fund manager at Toronto-based Morgan Meighen & Associates. "People are willing to pay a premium to buy out companies."

Energy producers such as EnCana fell on declining natural-gas prices, while financial companies including Bank of Nova Scotia retreated on concern that the Bank of Canada may raise borrowing costs next week.

The Standard & Poor's/TSX Composite Index closed little changed, slipping 4.35 to 14,060.39 in Toronto. The Canadian benchmark gained 2.5 percent in the previous two sessions and is within 0.8 percent of its June 18 record.

Trading was below average as stock markets in the US were closed for Independence Day. About 163.4 million shares changed hands in Toronto, compared with almost 379 million a week ago.

A measure of phone company stocks added 1.3 percent and is the best performer among 10 industry groups this year with a 29 percent advance.

Telus, Canada's second-biggest phone company, rose C$1.05 to C$65.65.

Scotia Capital analyst John Henderson said in a note that Telus "will trump" Ontario Teachers' Pension Plan's C$34.2billion ($32.1 billion) offer for BCE, which BCE accepted on June 30. Including debt the total value of the deal is C$51.7 billion.

Henderson said his share price forecast for Telus may rise to C$80 from C$75 based on synergies from a possible merger with BCE.

Telus may be acquired by New York-based buyout firm Cerberus Capital Management LP, the Globe and Mail reported on July 2, citing a person it didn't name who is familiar with the company's plans. Cerberus lost to Teachers' in its quest to buy BCE.

Shares of BCE added seven cents to C$41.32. The stock has gained 37 percent since the day before the Globe and Mail newspaper first reported a possible buyout on March 29.

Rogers Communications Inc. advanced C$1.27, or 2.8 percent, to C$47.51.