* TSX ends up 233.99 points at 10,604.06
* Energy shares lead with 4.6 percent rise
* Drop in gold-mining shares limits gain (Adds details)
By Frank Pingue
TORONTO, June 1 (Reuters) - Toronto's main stock index rose more than 2 percent on Monday, and at one point hit its highest level in more than seven months, as a surge in oil prices lit a fire under its energy sector.
The key Toronto index is now up 41.7 percent since hitting a five-year low in March, with the latest charge fueled by a more than 2 percent gain in oil prices, which rose on expectations of global economic recovery.
Shares of oil company EnCana Corp (ECA.TO), the biggest driver behind Monday's gain, rallied 4.7 percent to close at C$62.85, while Canadian Natural Resources (CNQ.TO) rose 5.3 percent to C$68.16. The energy sector ended up 4.59 percent.
The energy sector's rise easily offset the drag from the materials group, which checked out of the session down 0.42 percent as gold-mining shares fell on lower bullion prices.
A 2.25 percent rise in the financials group, which makes up about 33 percent of the index, also helped power the index's triple-digit gain. Investors bought shares of Canadian banks as most reported stronger-than-expected quarterly results last week.
The S&P/TSX composite index .GSPTSE closed 233.99 points, or 2.26 percent, higher at 10,604.06. Just after midday, the TSX reached 10,637.73, its highest level since Oct. 14.
"It was all follow-through buying from last week in the financials and some extremely strong momentum in the energy group," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.
"So it's a pretty strong gain considering that one of the heavyweight groups, the materials group, was sort of a drag on the index, and that's mainly because of the gold stocks."
Data released before the TSX opened showed Canada's economy shrank less in the first quarter than was expected by analysts. [ID:N01454666]. The report received credit for luring investors into stocks on the belief that the economy is on the road to recovery.
Still, some experts warn the rebound in the TSX since March may have been too far too fast.
"In the face of some awfully negative news the market has held in remarkably well so that is a good sign," said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario. "But it's come a long way in a short period of time, so I would not be surprised to see it go through a period of digestion."
$1=$1.09 Canadian Editing by Peter Galloway