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TORONTO, Jan 22 (Reuters) - Toronto's main stock market, which suffered its biggest drop in more than seven years in the previous session, could rise at the open on Tuesday after the Federal Reserve's surprise 75-basis-point interest rate cut.
U.S. markets were closed for Martin Luther King Day on Monday, so on Tuesday, investors have expected the closely watched Dow Jones industrial average .DJI to lead the charge lower as it plays catch-up with declines on global markets.
Still, the retreat may not be as steep as on Monday, after the U.S. Federal Reserve surprisingly slashed its key interest rate by 75 basis points on Tuesday in a bid to contain the damage to the economy.
"The Fed has put a little bit of juice into the market and psychologically, I think it is a good move," said Fred Ketchen, director of equity trading at ScotiaMcLeod.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE begins the day at 12,132.13 after dropping 604.99, or 4.75 percent, on Monday as it was sucked into a global equities tailspin on worries about the impact of a possible U.S. recession.
But now that the Fed has moved quickly to alleviate the damage, analysts actually see the Toronto market rising.
"Effectively, it looks like some buying support is coming in," said Gavin Graham, chief investment officer at The Guardian Group of Funds.
Investors will also pore over the latest words from the Bank of Canada for any clues on its interest rate stance.
The Bank of Canada, whose overnight rate is at 4.25 percent, will set interest rates at 9 a.m. and the Fed rate cut will increase the odds of a bigger-than-expected Canadian interest rate cut of 50 basis points.
In individual company news, Suncor Energy Inc (SU.TO) said on Tuesday its fourth-quarter earnings more than doubled, as higher revenue from oil sands eclipsed the impact of an outage at its Sarnia refinery.
$1=$1.03 Canadian Reporting by Scott Anderson; Editing by Bernadette Baum