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TORONTO (Reuters) - Toronto's main stock index ended higher on Wednesday on renewed investor faith that Friday's European Union summit will result in a comprehensive deal to resolve the euro zone debt crisis.
Financial shares, up 1.3 percent, kept the market above water with Royal Bank of Canada (RY.TO) up 2.2 percent at C$49.57 and Bank of Nova Scotia (BNS.TO) higher by 2.4 percent at C$49.03 after weakness the day before. Toronto-Dominion Bank (TD.TO) added 1.3 percent to close at C$73.85. The three banks were the index's most heavily-weighted gainers.
"The reason for the late day rally is because bank stocks have appeared to have caught a bid," said Robert McWhirter, president and portfolio manager at Selective Asset Management Inc.
"The reason for that may be because of optimism with regard to some type of settlement or resolution out of the European summit."
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE finished the day up 67.48 points, or 0.56 percent, at 12,148.73. Eight of the index's 10 main sectors were higher.
The index spent most of the morning in the red. And even though it managed to eke out a gain by day's end trade was rangebound. Investors have been reluctant to make significant bets ahead of Friday's European Union summit aimed at reaching a comprehensive deal to fix the euro zone debt crisis.
President Nicolas Sarkozy and Chancellor Angela Merkel detailed their plan to amend the EU treaty to anchor stricter budget discipline in the euro area in a letter to European Council President Herman Van Rompuy on Wednesday.
But pessimistic comments from EU paymaster Germany and new figures exposing deepening stress among Europe's banks kept traders on edge.
After climbing 4 percent on November 30 the TSX index has been stuck in a range of less than 300 points for the past five sessions.
"It's really a wait and see approach at this point," said Serge Pepin, head of investments at BMO Investments Inc.
"I think investors right now are just getting tired and want to see some solution, and perhaps giving the benefit of doubt that something positive will come out of this."
Among the heaviest decliners was Bank of Montreal (BMO.TO), which dropped 1 percent to C$57.15. At least four analysts downgraded shares of Bank of Montreal on Wednesday, after it reported a weaker than expected fourth-quarter profit and warned of sluggish conditions ahead.
Energy shares fell 0.1 percent and reflected a weaker oil price.
Suncor Energy (SU.TO) was down 1.2 percent to C$30.51.
The blue chip S&P/TSX 60 index .TSE60 closed 4.86 points higher, or 0.71 percent, at 689.70.
Editing by Jeffrey Hodgson