* TSX up 3.38 percent at 8,793.72
* Petro-Canada shares surge 23 pct on Suncor deal
* Financial sector rises 4 percent (Adds details, quotes)
By Jennifer Kwan
TORONTO, March 23 (Reuters) - Toronto’s main stock index rose sharply on Monday morning on optimism over a U.S. plan to purge banks of toxic assets and news that Suncor Energy (SU.TO) is set to buy rival Petro-Canada PCA.TO.
The energy sector, up 6.4 percent, led the TSX higher as Petro-Canada shares soared 23 percent to C$36.59 on news of its C$18.4 billion, all-share deal to be taken over by Suncor, creating Canada’s largest oil company. [ID:nN22497404]
Suncor shares fell briefly at the opening bell and then rose 3.4 percent to C$31.96.
Financial stocks were up 4 percent on news of a U.S. plan to buy up to $1 trillion worth of toxic assets from banks, a key element of Washington’s drive to pull the economy out of recession. [ID:nSP449612]
“Clearly, the market is taking it as good news,” said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.
“Overall, it is a plan that may in fact do what the U.S. has been trying to do for about eight months, which is finally develop something that will establish market prices for many of the assets still on bank balance sheets.”
At 9:56 a.m. (1356 GMT), the S&P/TSX composite index .GSPTSE rose 287.37 points, or 3.38 percent, to 8,793.72, with all of its 10 main groups higher.
Potash Corp of Saskatchewan (POT.TO) climbed 3.2 percent to C$98.32. Potash Corp said on Monday it plans to give its shareholders a say on the way it pays its top executives, joining several other Canadian companies that have adopted the practice in recent weeks. [ID:nN23175020]
$1=$1.23 Canadian Reporting by Jennifer Kwan; Editing by Peter Galloway