* TSX up 91.96 points, or 0.85 percent, at 10,885.33
* Financials rise 1.8 pct on hopes for recovery
* Index up 0.9 percent for week, 4th straight week of gains
* Rosy U.S. jobs data overshadows Canadian report (Adds details, quote)
By Jennifer Kwan
TORONTO, Aug 7 (Reuters) - Toronto's main stock index shot higher on Friday as the market shrugged off a weak Canadian employment report and focused on rosier-than-expected U.S. jobs data, which added to optimism about economy recovery.
The U.S. jobs data for July may be clearest sign yet that the U.S. economy is turning around [ID:nN07385157], and the TSX rose along with U.S. stocks in response.
The index's financial sector rose 1.8 percent, and gainers included Royal Bank of Canada (RY.TO), up 2 percent at C$51.09, and Canadian Imperial Bank of Commerce (CM.TO), which climbed 4.2 percent to C$68.75.
"The jobs numbers in the U.S. are much better than expectations so it's just another nail in the coffin of the recession," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
In Canada, however, job losses were more than double expectations, prompting Finance Minister Jim Flaherty to warn against any "euphoria" over imminent economic recovery. [ID:nN07405786]
The S&P/TSX composite index .GSPTSE closed 91.96 points, or 0.85 percent, higher at 10,885.33, with seven of its 10 main groups rising. The index was up 0.9 percent for the week. It was its fourth straight week of gains.
Nakamoto said part of the rise in the hefty financials group, which makes up about one-third of the TSX's weighting, was due to investors bidding up stocks following a 5.6 percent decline in the group on Thursday, which was spurred in large part by a 50 percent dividend cut by Manulife Financial (MFC.TO).
The TSX index has finished down only once in the past six sessions, and earlier this week it closed above the 11,000-mark twice. It is up 21 percent so far this year.
Some investors are "chasing the rally" because they've been surprised by how quickly the economic contraction is easing, said Anil Tahiliani, head of research at McLean & Partners Wealth Management Ltd in Calgary.
"A lot of people are being forced to come in and buy the market now because they're sitting on too much cash," he said.
Economically sensitive sectors such as the consumer discretionary group, up 2.2 percent, and industrials, up 3 percent, are benefiting as money is moved out of more defensive plays, Tahiliani said.
But investors should remain cautious as it wouldn't be a shock to see the market retreat in coming sessions given the TSX index's 46 percent rise from its March lows, he said.
The energy group sagged 0.1 percent on Friday, pulled down by weaker oil prices. [ID:nSP458159] Suncor Energy (SU.TO) fell 2 percent to C$36.32.
The materials group was lower, down 0.8 percent, as the price of gold eased. Gold miners Kinross (K.TO) and Agnico Eagle (AEM.TO) both fell by just over 2 percent.
The blue chip S&P/TSX 60 index .TSE60 closed 4.81 points higher, or 0.74 percent, at 655.71.
($1=$1.08 Canadian) (Reporting by Jennifer Kwan; editing by Peter Galloway)