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TORONTO (Reuters) - Canada's main stock index recovered on Tuesday, snapping a three-day losing streak, as investors eyed a Federal Reserve meeting for signs of a further scaling-back of the U.S. central bank's monetary stimulus.
Fears about China's economic growth outlook and another possible move by the Fed to trim its bond-buying program have weighed on investor sentiment since last week. Further, recent sharp drops in emerging market currencies, such as the Argentine peso and Turkish lira, threw global markets into disarray.
Global markets remained jittery ahead of any signal from the Fed as well as a decision by Turkey's central bank as to whether to raise interest rates in an attempt to stabilize the currency.
After a solid rebound in the second half of 2013 and a promising start to the current year, the Toronto index recorded two of its biggest single-day drops in recent months in the previous two sessions.
Despite Tuesday's gains, some market analysts were cautious.
"We may get a bounce today, but overall the market is on a downward trend," said Marcus Xu, portfolio manager at MY Capital Management Corp in Vancouver. "The biggest risk is the emerging markets."
"Everybody wants to be safe and nobody wants to stick their neck out," he added. Investors "want to be away from risky assets just for the time being."
Xu, who says that this year will be a lot more volatile than 2013, expects the TSX to outperform the S&P 500 .SPX index.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 105.37 points, or 0.78 percent, at 13,687.66.
All of the 10 main sectors on the index were higher.
Financials, the index's most heavily weighted sector, gained 0.5 percent, with Manulife Financial Corp (MFC.TO) adding 1.5 percent to C$20.87.
Shares of energy companies rose 1.1 percent, helped by higher oil prices. Canadian Natural Resources Ltd (CNQ.TO) advanced 2.6 percent to C$36.30 and was the most influential gainer on the index.
The materials sector, which includes mining stocks, added 1.9 percent. Barrick Gold Corp (ABX.TO) climbed 1.7 percent to C$20.96, and Teck Resources Ltd TCKb.TO advanced 3.2 percent to C$27.73.
In corporate news, First Quantum Minerals Ltd (FM.TO) said its Cobre Panama project in Central America should produce about 20 percent more copper than previously planned, but initial production will be delayed and development costs will be higher. The stock rose 2.6 percent to C$20.36.
Air Canada ACb.TO shares tumbled 12.3 percent, to C$7.63, as investors worried that Canada's weakening dollar would drive up costs at the country's largest airline.
Editing by Chizu Nomiyama, G Crosse