TORONTO (Reuters) - Toronto's main stock index finished lower yesterday as oil prices slid and a gloomy US jobs report dimmed hopes for a quick economic recovery.

US employers cut more jobs than expected in June and the unemployment rate rose to 9.5 percent, the highest level in 26 years.

"It is a disappointment for sure," said Steve Ibel, institutional equities trader at Beacon Securities.

The glum jobs picture pressured oil prices, which fell below $67 a barrel.

The TSX index's energy sector sank 4.12 percent and led the retreat. Suncor Energy was down 6.3 percent at C$33.16, while EnCana sank three percent to C$55.96.

Also dampening the mood was data from Europe that showed euro zone unemployment hit its highest level in 10 years in May.

The S&P/TSX composite index was down 129 points, or 1.24 percent, at 10,245.91, with seven of its 10 main groups lower. Earlier in the day, it fell by as much as 1.5 percent.

Cushioning the index's fall was its mining-heavy materials sector, which was up 1.93 percent, even though metals prices were lower. Analysts said investors bid gold names in a flight to safety move.

Goldcorp was up 2.33 percent at C$41.37, and Kinross Gold rose 3.77 percent to C$22.

The TSX index's drop is its second straight this week - Canadian markets were closed on Wednesday for Canada Day - and trade was expected to be thin today with US markets closed for the Independence Day holiday weekend.

Canadian bond prices moved higher in concert with their U.S. counterparts, which caught a safe-haven bid in the wake of the U.S. jobs numbers and a slump in equity markets.

The benchmark two-year government bond rose seven Canadian cents to C$100.15 to yield 1.17 percent, while the 10-year bond was up 14 Canadian cents at C$103.34 to yield 3.35 percent.

The 30-year bond gained 25 Canadian cents to C$119.60 to yield 3.848 percent. The comparable US issue yielded 4.325 percent.

Canadian bonds underperformed US issues across the curve. The Canadian 30-year bond was 47.7 basis points below the US 30-year yield, little changed from Tuesday.