TORONTO (Reuters) - The Toronto Stock Exchange's main index drove higher on Tuesday as banking issues were buoyed by signs of greater stability in financial markets.
The banking sector took its cue from news south of the border, where Lehman Brothers Holdings Inc LEH.N said it had raised $4 billion in capital to strengthen its balance sheet.
The news gave investors hope that financial institutions, which have taken the brunt of the fallout from the credit crisis, were on the road to recovery.
On Bay Street, Canadian Imperial Bank of Commerce (CM.TO) was up C$2.80, or 4.2 percent, at C$68.90, and Toronto-Dominion Bank (TD.TO) added C$1.98, or 3.2 percent, to C$64.50. The sector as a whole rose 2.5 percent.
Financials even took heart from a hefty $19 billion writedown by UBS UBSN.VX as optimism rose that banks were starting to come clean about their exposure to the U.S. subprime mortgage debacle.
"We have seen the market struggling to establish a bottom, and at this point it feels like it has been successful to quite an extent at doing so," said Elvis Picardo, investment strategist at Northern Securities Inc., in Vancouver, British Columbia.
"But I still think that sentiment is still fragile."
The S&P/TSX composite index .GSPTSE closed up 90.59 points, or 0.68 percent, at 13,440.72 with seven of its 10 main groups in positive territory.
Gains in shares of Rogers Communications (RCIb.TO) also gave the benchmark a lift after a list of qualified bidders for an upcoming wireless spectrum auction showed no U.S. carriers so far. Rogers was up C$2.91, or 7.9 percent, to C$39.83, while Telus Corp (T.TO) gained C$1.85, or 4.1 percent, to C$46.55. The telecoms group moved up 3.6 percent.
The resource-laden materials sector led the downside, falling 1.9 percent as it was stung by a sell-off in gold and other commodities. The gold producers subindex shed 3.8 percent, with Agnico-Eagle Mines (AEM.TO) down C$3.61, or 5.2 percent, at C$66.01, and Barrick Gold (ABX.TO) sliding C$2.18, or 4.9 percent, to C$42.70.
The heavyweight energy sector was off 0.6 percent as oil prices weakened. Suncor Energy (SU.TO) dipped 68 Canadian cents, or 0.7 percent, to C$98.53, while EnCana Corp (ECA.TO) gave up C$1.60, or 2.1 percent, at C$76.60.
Declines in TransCanada Corp (TRP.TO) also weighed on the index as the company's shares were down C$2.29, or 5.8 percent, at C$37.26. TransCanada said after the closing bell that it will issue new shares to pay for part of a U.S. power plant purchase.
Speculation that the company would have to issue a large amount of equity to fund its $2.9 billion acquisition had put pressure on its stock price during the day.
Analysts cautioned that while the positive mood had helped put some confidence back into the Toronto market, uncertainty persists.
"It's not something that's fundamentally changed, it's just the sentiment, as we've seen, really bounces around from day to day in this environment, and today has been one of the days where it's been positive all around," Picardo said.
Market volume was 408 million shares worth C$7.7 billion. Decliners outpaced advancers 844 to 785. The blue chip S&P/TSX 60 index .TSE60 closed up 6.50 points, or 0.83 percent, at 789.94.
On Wall Street, investors also applauded the Lehman offering, sending the Dow Jones industrial average .DJI up 391.47 points, or 3.19 percent, at 12,654.36. The Nasdaq Composite Index .IXIC rose 83.65 points, or 3.67 percent, to 2,362.75.
Editing by Peter Galloway