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*U.S. Fannie Mae, Freddie Mac bailout boosts banks
*Italy's Eni SpA to buy First Calgary in C$923 mln deal
TORONTO, Sept 8 (Reuters) - The Toronto Stock Exchange's main index rose on Monday morning, jolted higher by the bailout of U.S. home mortgage giants Fannie Mae FNM.N and Freddie Mac FRE.N, which helped ease concerns over the year-old credit market crisis.
But the benchmark index backed off the 2.3-percent rise it registered at the open as investors remained cautious due to nagging concerns over slowing global economic growth, said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
"I'd call it the light at the end of the tunnel," Nakamoto said of initial market reaction. "For a while, there didn't seem to be any light."
However, investors must still contend with "the global slowing that is out there," he added.
"I think there are a lot of doubters out there saying this is nothing more that a short-cover rally," Nakamoto said.
At midmorning, the S&P/TSX composite index .GSPTSE was up 150.08 points, or 1.17 percent, at 12,966.50, backing off after surging 300 points, or 2.3 percent, at the open. Seven of its 10 main groups was higher.
The U.S. government took control of the two mortgage finance firms on Sunday in the latest of a series of emergency steps to help the economy. For details, see [ID:nSP327680]
The heavily-weighted financial services sector, which accounts for just under one-quarter of the benchmark index's total weight, led the rally, up 3.4 percent. Royal Bank of Canada (RY.TO) was up 2.7 percent at C$49.70.
In choppy activity, the energy sector was little changed, up 0.2 percent after treading in positive territory, with oil around $107 a barrel as Hurricane Ike whirled toward the U.S. Gulf oil hub, and traders awaited OPEC's decision this week on output policy. EnCana Corp (ECA.TO) climbed 1 percent to C$72.58, while Canadian Natural Resources (CNQ.TO) slipped 1.5 percent to C$82.07.
Elsewhere, Italy's Eni SpA (ENI.MI) said it will buy Canada's First Calgary Petroleums Ltd FCP.TO in a cash deal worth C$923 million to boost its oil and gas reserves. [ID:nL8618034]
First Calgary slipped 1.7 percent to C$3.49.
Sherritt International (S.TO) fell 2.4 percent to C$8.25. Sherritt, which has extensive metals, coal and oil operations in Cuba, said that it was "business as usual" at all of its Cuban operations after Hurricane Ike ripped through the island.
Materials, home to resource shares were down 0.24 percent, even as the price of bullion and most base metals was higher. NovaGold Resources (NG.TO) sank 5.8 percent to C$5.65.
The disconnect between energy and materials and their underlying commodities is likely due to profit-taking, Nakamoto said. ($1=$1.07 Canadian) (Reporting by Jennifer Kwan; Editing by Peter Galloway)