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By Leah Schnurr
TORONTO, March 20 (Reuters) - The Toronto Stock Exchange's main index ended a volatile session higher on Thursday, as financials were buoyed by Bank of Montreal's (BMO.TO) deal to restructure two of its commercial paper trusts.
The rally in the banking sector helped the benchmark overcome earlier sharp declines, as it was dragged down by resource issues that were shaken by retreating commodity prices.
Bank of Montreal (BMO.TO) jumped C$2.41, or 5.7 percent, to C$44.51 after it said late on Wednesday it had come to an agreement with counterparties and investors to restructure its Apex and Sitka commercial paper trusts.
The bank's shares have been battered by concern over its exposure to investments hurt by the credit crunch and fears that further writedowns will be needed.
The sector as a whole gained 2.1 percent, as Canadian Imperial Bank of Commerce (CM.TO) rose C$4.09, or 6.8 percent, to C$64.26 and National Bank of Canada (NA.TO) was up C$3.18, or 7.1 percent, at C$48.18.
"BMO set the tone and it may be that they've put a finger in the dyke at least," said John Kinsey, portfolio manager at Caldwell Securities Ltd.
"In our case it was really the ABCPs that were the problem, more so than any of the subprime or the derivatives (problems in the United States)," said Kinsey. "If indeed that is the case, we may be 90 percent there to remedying the situation and that obviously would be good for Canada."
The S&P/TSX composite index .GSPTSE closed up 66.26 points, or 0.52 percent, at 12,775.64 with six of its 10 main groups higher.
Shares in energy and mining companies came off the day's lows but still finished in the negative amid a second day of retreating commodity prices.
The materials sector was down 1.6 percent, as the price of gold and other metals followed through on a sharp descent that began on Wednesday. Barrick Gold (ABX.TO) was down C$2.98, or 6.5 percent, at C$42.98 and Goldcorp (G.TO) fell C$1.32, or 3.3 percent, to C$38.18.
The oil and gas sector fared better, but was off 0.4 percent. The price of oil dipped 70 cents to $101.84 a barrel after earlier falling below $100. Suncor Energy (SU.TO) slid C$1.41, or 1.5 percent, to C$95.26 and Husky Energy (HSE.TO) lost 54 Canadian cents, or 1.3 percent, to C$39.95.
"In general, starting yesterday, there appears to have been a trade out of commodities into financials, and it created quite a decline in commodities as people got off the gold, metals (and) oil trade," said Paul Hand, managing director at RBC Capital Markets.
A steep drop in commodity prices helped the TSX dive more than 400 points on Wednesday. After swinging wildly to both sides of the break-even mark, the index was down 3.6 percent for the week, which is shortened by the Good Friday holiday on Friday.
Also on the upside on Thursday, Research In Motion RIM.TO gained C$4.50, or 4.4 percent, to C$107.07 and helped bring the tech sector up 2.9 percent.
Market volume was a hefty 593 million shares worth C$12.8 billion. Decliners outpaced advancers 901 to 698. The blue chip S&P/TSX 60 index .TSE60 closed up 4.45 points, or 0.6 percent, at 750.91.
In New York, stocks soared to their best week in almost two months amid gains by financials and hopes that the credit crunch will ease.
The Dow Jones industrial average .DJI rose 261.66 points, or 2.16 percent, to 12,361.32, and the Nasdaq composite index .IXIC was up 48.15 points, or 2.18 percent, at 2,258.11.
$1=$1.02 Canadian Editing by Rob Wilson