TORONTO, Dec 12 (Reuters) - Toronto stocks surged on Wednesday morning, reversing the previous day's steep decline, as major central banks stepped in to relieve the global credit crunch.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was up 169.58 points, or 1.2 percent, at 13,893.29 after touching as high as 13,942.04 in opening trade.
This followed a loss of 216.65 points on Tuesday after investors were disappointed by the U.S. Federal Reserve's decision to cut interest rates by only 25 basis points.
Central banks around world said on Wednesday they have joined to launch a new temporary term auction facility designed to address elevated pressures in short-term funding markets.
Under the program, the U.S. Federal Reserve will auction short-term funds to depository institutions against a wide variety of collateral that can be used to secure discount window loans. The program also includes establishment of foreign-exchange swap lines with the European Central Bank and the Swiss National Bank.
The Bank of Canada said on Wednesday it will expand its list of securities eligible as collateral to provide liquidity to the markets and will include U.S. Treasuries, probably by the middle of 2008.
"The announcement out of the various central banks about their new liquidity attempts has certainly put a bid in the market after yesterday's disappointment," said Paul Hand, managing director at RBC Capital Markets. "We will certainly see how long it lasts."
All 10 of the TSX index's main groups rose, led by a 1.8 percent boost in the energy group, and a 1.9 percent push from the materials group. Financial issues were up 1.1 percent.
EnCana said on Wednesday it plans to double its 2008 dividend and boost capital expenditure by 13 percent as it focuses on higher U.S. natural gas production, and longer-term projects including Canadian oil sands and refining.
Among the financial institutions rising were Bank of Nova Scotia (BNS.TO), which climbed 68 Canadian cents to C$52.90, and insurer Manulife Financial (MFC.TO), which gained 81 Canadian cents to C$41.70. ($1=$1.00 Canadian) (Reporting by Scott Anderson; Editing by Peter Galloway)