October 17, 2008 / 5:05 PM / 9 years ago

UPDATE 2-Toronto stock index rebounds as oil price rises

* Battered energy sector gains as oil recovers

* Materials sector turns positive, but gold drags

* Index rebounds from 200-point loss (Updates to prices to midday, adds quotes)

TORONTO, Oct 17 (Reuters) - The Toronto Stock Exchange’s main index was up more than 3 percent at midday on Friday, reversing its steep drop just after the open, with energy issues leading the charge on the recovering price of oil.

The energy group, which has been under pressure most of the week, gained 6.1 percent as oil rose from a 16-month low to about $72 a barrel. [ID:nN16417066]

Oil prices are off more than 50 percent from the high above $147 a barrel they hit just three months ago, and the energy group has trended lower alongside them.

Husky Energy (HSE.TO) was up 9.5 percent at C$32.51, while EnCana (ECA.TO) gained 6 percent to C$49.28.

Shortly after 12:25 noon. (1630 GMT), the S&P/TSX composite index .GSPTSE was up 302.58 points, or 3.3 percent, at 9,572.55. All 10 of the index’s main groups were higher.

The index fell 200 points at the open as falling gold prices and recession worries stemming from the credit crisis took hold once again. But it climbed steadily as the market’s focus moved to oil prices and bargain-hunting.

Fred Ketchen, director of equity trading at ScotiaMcLeod, said given the big swings in recent weeks, the market was seeking calmer waters.

“I can’t see that we’re going to experience a whole lot more declines,” he said. “I think the market has found a level at which it’s feeling comfortable.”

The materials group, which includes miners, was the lone sector in the red for most of the morning. It turned positive by midday, up 0.5 percent. But the rise was tenuous as the gold mining subindex was down 1.8 percent with gold falling below $800 per ounce, extending the previous session’s 5 percent drop. [ID:nLH657568]

Goldcorp (G.TO) lost 2.7 percent to C$24.08, while Barrick Gold (ABX.TO) fell 2.6 percent to C$28.30.

Recession fears, however, continued. In Canada, consumer confidence fell in October to its lowest since 1982, when the economy was in recession, according to a survey by the Conference Board of Canada. [ID:nN17453806]

In the United States, consumer confidence suffered its steepest monthly drop on record and new home construction fell to a 17-1/2 year low. [ID:nN17455262]

These kinds of fears have created volatility in large, and sometimes erratic, swings on a daily basis.

“It reflects uncertainty. People are clueless or very filled with fear with what’s going to be out there in the next three months. The system was very close to systemic risk,” said Francis Campeau, broker at MF Global Canada, in Montreal.

“There’s also a lot of value investors that want to buy.”

Financials were also a bright spot, up 3 percent, as the country’s accounting watchdog unveiled new accounting rules that would allow banks and insurers to reclassify financial assets. [ID:nWNA6990]

Banks and insurers were on the rise as Bank of Montreal (BMO.TO) rose 5.5 percent to C$43.77 and CIBC (CM.TO) gained 4.7 percent to C$56.95. ($1=$1.18 Canadian) (Reporting by Ka Yan Ng and Jennifer Kwan; Editing by Peter Galloway)

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