UPDATE 2-Toronto stocks surge on central bank rescue effort

Thu Sep 18, 2008 11:24am EDT
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*Financial services sector up nearly 4 percent

*Energy stocks rise with oil price

*Maple Leaf Foods up after meat plant output resumes

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TORONTO, Sept 18 (Reuters) - The Toronto Stock Exchange's main index soared on Thursday morning after central banks around the world poured in $180 billion in extra liquidity to calm markets made jittery by the mayhem on Wall Street.

The rally reversed a nearly 3 percent tumble on Wednesday, when the Toronto index dipped into bear-market territory, down 21 percent from its June 18 peak.

The central bank injection [ID:nSP129521] comes after the U.S. government earlier this week rescued insurer American International Group (AIG.N: Quote) with an $85 billion loan to stave off its bankruptcy, a move that was met with trepidation as investors worried the bailout wouldn't be enough to stem the financial turmoil. [ID:nN13574113]

Thursday's rally is a reaction to hitting bear territory and to the move by central banks, said Irwin Michael, portfolio manager at ABC Funds.

"It's a tug of war," he said. "On the one hand you still have the negativity of uncertain hedge funds and various brokerage houses. You've also got people looking for a hedge, and the hedge is gold and maybe back into oil."   Continued...