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TORONTO (Reuters) - Canadian stocks rose on Thursday following a sharp selloff the previous session, encouraged by stronger-than-expected earnings from Canada's top two banks, surging oil prices, and upbeat economic data from China and the United States.
Royal Bank of Canada (RY.TO) and Toronto-Dominion Bank (TD.TO) pushed the index's financial sector up 1.1 percent after the banking heavyweights' earnings topped estimates and both raised their dividends.
Shares of RBC, the country's largest bank, shot up 2 percent to C$56.80, and No. 2 lender TD was up 1.4 percent at C$82.
Canadian financials have risen more than 7 percent this year, reversing a 7.5-percent loss in 2011.
"The banks look like they're definitely breaking out of a bit of a funk for the last year," said Mike Newton, portfolio manager at Macquarie Private Wealth Inc.
Investors overlooked lower net income numbers at RBC and TD and focused on the dividend increases. The interest boosted shares of banks that are still due to report, with Bank of Nova Scotia (BNS.TO) climbing 0.8 percent to C$53.79 and Canadian Imperial Bank of Commerce (CM.TO) up 0.4 percent to C$77.03.
"When you're only getting 1 percent in your money market and you can find a stock yielding 2 to 4 percent with the potential for capital gain, that's a bit of an aphrodisiac to get invested in the marketplace," said Irwin Michael, portfolio manager at ABC Funds.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 79.45 points, or 0.63 percent, at 12,723.46.
Energy issues contributed to the gain, rising 0.8 percent as Brent crude futures surged to a 10-month high above $126 on increased tension between Israel and Iran. <O/R>
Oil and gas explorer Ithaca Energy Inc IAE.TO was helped by the oil-price rise and by takeover speculation, spiking nearly 10 percent to C$3.12 after the company said it has received unsolicited interest from a number of parties.
The index's materials group climbed 0.55 percent as mining stocks rose on higher gold and metal prices. Canada's second-largest gold producer, Goldcorp (G.TO), led the sector, rising 2 percent to C$48.91 as bullion prices rebounded after tumbling 3 percent the previous session. <GOL/>
First Quantum Minerals FM.TO jumped 3.5 percent to C$23.43, helped by higher copper prices after encouraging data from top metals consumer China. China's official purchasing managers' index rose to 51.0 in February from 50.5 in January, hinting that the country will avoid a sharp slowdown. <MET/L>
Resource issues were also supported by U.S. data that showed jobless claims fell again last week, trumping other data which showed the manufacturing sector cooled last month while construction spending fell in January.
Weak 2012 earnings expectations for Bombardier Inc (BBDb.TO) and Research In Motion RIM.TO limited gains. Bombardier shares fell 9.5 percent to C$4.30 after the plane and train maker said it expects a drop in aircraft deliveries and related profit margins in 2012.
"There was definitely more tolerance for disappointment in the banks today than there was in Bombardier," said Newton.
RIM shares tumbled almost 5 percent to C$13.35 after analysts said the embattled Blackberry maker is likely to preannounce poor February quarter results and to forecast a "very weak" May quarter on lower sales.
Editing by Jeffrey Hodgson