TORONTO (Reuters) - Toronto's main stock index fell nearly four percent to its lowest closing level in more than five years yesterday, hit by lower commodity prices, weak economic data and nagging concerns about US banks.

All 10 TSX sectors finished lower in a decline headlined by a five percent drop in the big energy sector as persistent fears of a prolonged global slowdown weighed on oil prices.

EnCana Corp led the energy group lower as its shares tumbled 7.2 percent to C$44.78, followed by TransCanada Corp, which ended down 5.9 percent at C$30.10.

The slide in oil prices followed weak Canadian retail sales data for December that puts pressure on the Bank of Canada to cut interest rates below the current 50-year low of 1 percent at its next policy announcement date on March 3.

"While it's not a significant data point in and of itself, it just confirms what many investors have been fearing, that this recession is much deeper and much longer than what we had believed a few months ago," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.

"You also had US indices like the Dow Jones and S&P 500 trading at their lowest levels in over 10 years and that is another factor that really depresses sentiment."

Lingering uncertainty about US government actions to shore up beleaguered banks banks rattled equities in the United States and the selling spilled over into Canada.

The S&P/TSX composite index closed down 302.32 points, or 3.8 percent, at 7,647.67. The index had risen one percent just after the open.

Fears that some US banks could be nationalised continued to drag on investor sentiment in the week's first session. And talk of a new government stake in Citigroup Inc did little to calm worries that the bank would not be able to absorb soaring losses in a recession

The concerns spilled into Canada and stripped the heavily weighted financial index of 3.56 percent of its value, making it a key driver of the TSX's second straight sell-off.