* TSX up 202.02 points, or 1.61 percent, at 12,720.56
* All 10 sectors higher, energy leads gains
By Trish Nixon
TORONTO, Sept 7 (Reuters) - Toronto's main stock market index snapped a three-day losing streak on Wednesday as sentiment turned after Germany's top court cleared the way for Berlin to contribute more to the euro zone's rescue fund.
European stocks bounced back from a two-year low after the court rejected lawsuits aimed at blocking the country's participation in aid to Greece and other nations, giving relief to investors after this week's sharp sell-off in risk assets. [MKTS/GLOB]
"Stocks are pretty well oversold ... At this point, where valuations are, anything other than a recession in the U.S. is probably going to be bullish for equities," said Robert Kavcic, economist at BMO Capital Markets.
Beaten-down energy stocks rallied to lead the index's gains, jumping 2.4 percent as oil rose to a five-week high.
Suncor Energy (SU.TO) was the most heavily weighted gainer, up 3.7 percent at C$30.36, while Canadian Natural Resources (CNQ.TO) added 3.2 percent to C$35.66.
"Other than financials we are seeing cyclicals carry most of the strength today," Kavcic said.
"For the past three or four months we've seen defensive sectors outperform pretty significantly, as economic growth expectations have been ratcheted down. Today we are seeing a little bit of the opposite."
Financial issues also recovered some of their recent losses, rising 1.7 percent. Royal Bank of Canada (RY.TO) climbed 1.8 percent to C$49.07, while Bank of Nova Scotia (BNS.TO) jumped 2 percent to C$53.25.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 202.02 points, or 1.61 percent, at 12,720.56. All ten of the index's main sectors were higher.
"The market is hopeful that this will be a turnaround week," said Barry Schwartz, vice president and portfolio manager at Baskin Financial Services.
"Dramatic, quick and decisive action needs to be taken on a number of issues; jobs, debt and growth. The market is feeling like if some of these things come together, the valuations on stocks are so cheap and interest rates are so low, that we could be set up for an explosive rally."
U.S. President Barack Obama is due to lay out a job-creation package on Thursday and G7 finance ministers and central bankers meet in Marseilles, France this weekend to discuss measures to boost global economic growth. (Editing by Jeffrey Hodgson)