* At 09:40 a.m. ET (1340 GMT), the Toronto Stock Exchange's S&P/TSX composite index was down 68.49 points, or 0.41%, at 16,461.57.* Limiting losses on the index was data that showed Canadian manufacturing sales rose by a record 20.7% in June as many factories operated at a much higher capacity than in May.
* The Canadian dollar weakened against its U.S. counterpart on Friday as investor caution about taking on more risk offset stronger-than-expected domestic manufacturing data.
* The materials sector, which includes precious metal miners, lost 0.8% as gold futures slipped.[GOL/]
* On the TSX, 47 issues were higher, while 168 issues declined for a 3.57-to-1 ratio to the downside, with 15.05 million shares traded.
* The largest percentage gainer on the TSX was Spin Master Corp, which jumped 4.2%, after Jefferies raised its target price on the children's entertainment company.
* Specialty packaging company Intertape Polymer Group, which rose 2.7%, after BMO raised its price target on the stock.
* The largest decliners were Algonquin Power & Utilities Corp, down 4.1%, and Sienna Senior Living Inc, down 2.7%, after the companies reported their quarterly results.
* The most heavily traded shares by volume were Zenabis Global, Enbridge and Magna International.
* The TSX posted no new 52-week high and no new low.
* Across all Canadian issues there were seven new 52-week highs and one new low, with total volume of 35.96 million shares.
(Reporting by Shivani Kumaresan in Bengaluru; Editing by Amy Caren Daniel)