* TSX up 130.56 points, or 1.21 percent, at 10,920.53
* Bank of Montreal results top forecasts, other banks rise
* U.S. data, Bernanke nomination support equity strength (Adds details, quotes)
By Jennifer Kwan
TORONTO, Aug 25 (Reuters) - Toronto's main stock index ended higher on Tuesday as Bank of Montreal energized financial issues by kicking off the sector's quarterly earnings season with surprisingly strong results.
Bank of Montreal (BMO.TO), Canada's fourth-largest bank, climbed 6.7 percent to C$52.30 after delivering a profit that comfortably surpassed market expectations. [ID:nN24133906]
The results, which could bode well for the rest of country's banks this week, helped lift the hefty financials group by 3.6 percent.
Big banks were among the top 10 most influential movers, led by Royal Bank of Canada (RY.TO), the country's biggest lender, which was up 4.1 percent at C$52.80. Toronto-Dominion Bank (TD.TO) climbed 3.3 percent to C$65.72. Insurers were also strong performers, with Manulife Financial (MFC.TO) ahead 3.1 percent at C$23.09.
"The financials have been on a tear. With BMO kicking off the season with a positive tone that's going to drag everything else along," said Levente Mady, market strategist at Union Securities in Vancouver.
The S&P/TSX composite index .GSPTSE finished up 130.56 points, or 1.21 percent, at 10,920.53, with seven of its 10 groups higher.
News that BMO set aside less money to cover bad loans created a sense of "euphoria" around expectations for other banks when they report in coming days, said Douglas Davis, chief executive at Davis-Rea.
"If they are also modest in their loan writeoffs then that will continue to cause strength in the bank stocks," said Davis.
Also helping investor sentiment was rosier than expected U.S. housing and consumer confidence data and news that Ben Bernanke was nominated as chairman of the U.S. Federal Reserve for a second term. The latter news ended uncertainty about the U.S. central bank's leadership as the economy climbs out of recession. [ID:nN25205751] [ID:nLP233065]
The Bernanke news was "definitely perceived as good news" by the market, said Mady.
"Financial markets certainly like continuity and like to deal with a known quantity," he said.
Firm gold prices helped to support the TSX materials group, which finished up 1 percent [ID:nLP167884]. Goldcorp (G.TO) climbed 1.8 percent to C$39.02.
On the down side, the big energy sector sagged 0.7 percent as the price of oil CLc1 retreated from a 10-month high hit earlier in the day to settle lower at $72.05 a barrel. [ID:nSP347579]
Canadian Natural Resources (CNQ.TO) sank 1.7 percent to C$64.79 and Talisman Energy TLM.TO fell 0.9 percent to C$17.83.
The blue chip S&P/TSX 60 index closed 8.50 points higher, or 1.31 percent, at 657.04.
$1=$1.09 Canadian Reporting by Jennifer Kwan; editing by Rob Wilson