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* TSX up 220.17 points, or 2.06 percent, at 10,921.49
* Materials sector up 3.9 percent as gold nears $1,000/oz
* Financials rise after two straight days on the wane (Adds details, quote)
TORONTO, Sept 3 (Reuters) - Toronto's main stock index closed higher for a second straight day on Thursday as surging bullion prices lifted gold miners and a strong performance in Chinese stocks further brightened market sentiment.
Base metals prices were also higher and the index's materials sector, which includes miners, was up 3.9 percent.
"The gains have been fairly broad based but the materials sector has been the key driver," said Fergal Smith, managing market strategist at Action Economics.
"Both base and precious metals have advanced. The huge rally on the Shanghai composite overnight helped boost market sentiment and sparked rotation back into the riskier assets."
The S&P/TSX composite index .GSPTSE closed up 220.17 points, or 2.06 percent, at 10,921.49.
Emerging markets .MSCIEF and Shanghai stocks .SSEC climbed after China's top regulator assured investors that the country's market was healthy. [ID:nHKG249919]
The health of Chinese equities has often been seen lately as a barometer of economic optimism.
Banks were also strong performers in Toronto, and the index's financials group rose 2 percent following better-than-expected earnings from a pair of regional banks. [ID:nN039427]
"We had a modest pullback in the previous days so that's improved valuations," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.
"More importantly, you had two of the smaller banks come out with results that beat expectations. That's again focused attention on how well Canadian financial stocks in general have been doing, and I think that's attracted more buying to the table."
Canadian Western Bank CWB.TO rose 4.3 percent to C$18.36 and Laurentian Bank (LB.TO) climbed 4.7 percent to C$37.94.
The industrial sector rose 3 percent, helped by Canadian National Railway CNR.TO, up 4 percent at C$53.51, and Canadian Pacific Railway CP.TO, which climbed 4.7 percent to C$52.12.
Top names in the red included Manulife Financial (MFC.TO), which fell 0.14 percent to C$21.09, and Canadian Oil Sands Trust COS_u.TO, down 0.9 percent at C$26.62.
The blue chip S&P/TSX 60 index .TSE60 closed 12.94 points higher, or 2.01 percent, at 655.89.
$1=$1.10 Canadian Reporting by Jennifer Kwan and Ka Yan Ng; Editing By Jeffrey Jones