August 27, 2015 / 3:52 PM / 2 years ago

CANADA STOCKS-TSX extends rally as oil prices soar

(Updates with additional details, market reaction, analyst comments)

* TSX up 338.97 points, or 2.53 percent, at 13,720.56

* All of the TSX's 10 main groups rose

By Solarina Ho

TORONTO, Aug 27 (Reuters) - Canada's main stock index jumped more than 2 percent on Thursday, recouping this week's hefty losses, as a surge in crude prices fueled a rally in energy shares and helped lead an across-the-board bounce.

U.S. prices vaulted 6.8 percent to $41.23 a barrel late morning on a global rally in equity markets and an unexpected fall in U.S. crude inventories.

"You've seen a rebound in oil prices, so that's really driving it," said Kevin Headland, director at Manulife Asset Management's Portfolio Advisory Group, who still warned of tougher days ahead.

"Demand for commodities is definitely not improving. The slowing growth in China, the slowing growth around the world, I think that's really going to keep a lid on the TSX for the next little while."

All 10 of the index's 10 main groups were on higher ground, with the three most influential sectors, energy, materials and financials climbing 6.4 percent, 2.1 percent, and 3.6 percent, respectively. The three groups make up roughly two-thirds of the index's weight.

Suncor Energy Inc was the most influential gainer on the index, jumping 4.9 percent to C$36.22. It was closely followed by Canadian Natural Resources Ltd, which soared 7.5 percent to C$27.95.

Canada's biggest bank, Royal Bank of Canada, jumped 2.4 percent to C$73.80.

At 11:31 a.m. EDT (1531 GMT), the Toronto Stock Exchange's S&P/TSX composite index rose 338.97 points, or 2.53 percent, to 13,720.56.

Advancing issues outnumbered declining ones on the TSX by 234 to 12, for a 19.50-to-1 ratio on the upside.

On the earnings front, both Toronto-Dominion Bank and Canadian Imperial Bank of Commerce reported higher third-quarter profits that topped estimates. The results helped TD rise 1.1 percent to C$52.38, while CIBC rose 5.6 percent to C$95.40

Headland cautioned that the impact of cheap energy prices was starting to hit banks and said it will become tougher for Canadian banks to maintain their margins. (Reporting by Solarina Ho; Editing by Andrew Hay)

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