February 10, 2010 / 7:16 PM / in 8 years

CANADA STOCKS-TSX rebounds on speculation of Greek deal

* TSX up 41.11 points, or 0.36 percent, at 11,315.35

* Greek speculation helps banks pull index from loss

* Bernanke lays out path for policy changes (Adds details, quote)

TORONTO, Feb 10 (Reuters) - Toronto’s main stock market index was moderately higher on Wednesday afternoon as speculation that a resolution to Greece’s debt woes was near boosted Royal Bank of Canada (RY.TO) and other bank shares.

Royal Bank rose 1.8 percent to C$54.76, Toronto-Dominion Bank (TD.TO) climbed 1.2 percent to C$64.31, and Bank of Nova Scotia (BNS.TO) was up 1.3 percent at C$46.35.

Investors were seen to be closing out short positions ahead of an expected rally in the market if, as expected by some, the European Union summit in Brussels on Thursday comes up with a deal to alleviate Greece’s debt problems.

“It seems we might be seeing some short-covering ahead of Europe’s meeting tomorrow and that’s what is fueling the afternoon rally,” said Francis Campeau, broker at MF Global Canada, in Montreal.

The story was similar in the United States, where stocks recovered from morning losses after a report suggested a European rescue plan for debt-burdened Greece may be presented this week. [ID:nLDE6192QE]

At 1:36 p.m. (1836 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was up 41.11 points, or 0.36 percent, at 11,315.35. Earlier, it fell as much as 61.8 points.

The index’s morning drop was abetted by comments from U.S. Federal Reserve Chairman Ben Bernanke about pulling back on the central bank’s super-loose monetary policy when the time comes, as well as by uncertainty about the outcome of Thursday’s EU summit. [ID:nWEQ003786] [ID:nLDE6190UP] [ID:nEUROPEAND] [MKTS/GLOB]

“Bernanke is talking about beginning to reduce the liquidity in the U.S. market,” said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.

“If you’re in a world where everyone is still worrying about Greece and the impact of the financial crisis and the U.S. is beginning to talk about what’s the next step...that makes everyone nervous that that may be happening too soon.”

The U.S. Federal Reserve could begin pulling back its unprecedented stimulus for the economy by first removing some cash from the financial system and then raising interest rates, Bernanke said.

On the downside, Suncor Energy (SU.TO), whose rating was cut to “sector perform” from “market perform” by RBC, was off 1.4 percent at C$31.39.

$1=$1.07 Canadian Reporting by Jennifer Kwan and Ka Yan Ng; editing by Peter Galloway

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