July 17, 2008 / 3:16 PM / 9 years ago

UPDATE 1-Toronto stocks higher on stronger banks

(Adds details)

* TSX extends gains on upbeat U.S. bank results

* Gold price rises, buoys materials issues

* Barrick to buy Cadence Energy in C$410 million deal

TORONTO, July 17 (Reuters) - The Toronto Stock Exchange’s main index extending its gains on Thursday morning as upbeat quarterly earnings in the battered U.S. financial sector helped boost Canada’s bank issues.

The heavily weighted financials sector, which makes up about a quarter of the benchmark, shot up 2 percent, adding to its 5.9 percent gain on Wednesday.

The rise was largely prompted by healthy quarterly results posted on Thursday by No. 3 U.S. bank JPMorgan Chase & Co (JPM.N), following on the heels of results from Wells Fargo & Co (WFC.N) on Wednesday.

“Because the financials have caused so much grief, any kind of sentiment change is very, very important in the market,” said Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management Ltd in Calgary.

“There’s been some early indications that the pessimism may be excessive.”

Toronto’s financials have shed around 18 percent so far this year on fears that troubles in the U.S. banking and mortgage market would spill over into Canada.

By midmorning, the S&P/TSX composite index .GSPTSE was up 148.89 points, or 1.1 percent, at 13,652.69, with nine of its 10 main subgroups higher. Energy was down 0.1 percent.

Toronto-Dominion Bank (TD.TO) rose C$1.31, or 2.3 percent, to C$58.88, while Royal Bank of Canada (RY.TO) jumped 94 Canadian cents, or 2.1 percent, to C$43.72.

Also fueling positive sentiment is the easing price of oil from record levels last week, which has put “tremendous pressure on the economy,” said Kerkovius.

Oil and gas issues were slightly lower amid softness in oil prices, which turned positive and held steady around $136 a barrel. EnCana Corp (ECA.TO) dipped 41 Canadian cents to C$80.19.

Shares of Nexen Inc NXY.TO fell C$1.96, or 5.3 percent, to C$5, as Canada’s fourth-largest independent oil producer and explorer reported a slightly higher second-quarter profit on Thursday.

The resource-heavy materials group was up 0.9 percent, helped by firm gold prices, which rose to around $973 an ounce.

In company news, Barrick Gold Corp (ABX.TO) said on Thursday it had submitted a formal offer to buy Cadence Energy Inc CDS.TO for C$410 million ($410 million).

Barrick climbed 60 Canadian cents, or 1.2 percent, to C$49.10, while Cadence Energy rose 60 Canadian cents, or 9.7 percent, to C$6.80. ($1=$1.00 Canadian) (Reporting by Jennifer Kwan; editing by Rob Wilson)

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