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By Leah Schnurr
TORONTO, Feb 25 (Reuters) - The Toronto Stock Exchange's main index finished strongly higher on Monday, supported by gains in energy and resource shares, and further lifted by relief over the health of U.S. bond insurers.
The energy sector, which accounts for about 25 percent of the index, rose 2.3 percent as oil prices climbed above $99 a barrel amid cold weather in Europe and parts of the United States.
"(There's) relief that the bond insurance companies - the Ambacs, the MBIAs, the monolines - are not getting downgraded, at least imminently," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.
"I think that propelled the second leg of the market rise today."
The S&P/TSX composite index .GSPTSE closed up 111.52 points, or 0.82 percent, at 13,697.45 with six of its 10 main groups climbing.
The resource-laden materials sector pushed up 1.2 percent, with Potash Corp of Saskatchewan (POT.TO) gaining C$4.93, or 3.1 percent, to C$163.45, and Agrium Inc (AGU.TO) adding C$2.49, or 3.5 percent, to C$73.98.
But the subindex of gold producers slid 1.3 percent as the price of bullion stumbled. Barrick Gold (ABX.TO) was down C$1.31, or 2.6 percent, at C$49.32.
The heavyweight financial sector treaded water to finish 0.3 percent lower, but banking stocks were mixed with Royal Bank of Canada (RY.TO) down 31 Canadian cents, or 0.6 percent, at C$50.19, and Canadian Imperial Bank of Commerce (CM.TO) edging up 49 Canadian cents, or 0.7 percent, to C$68.10.
"The expectation was that the Canadian financials' exposure to MBIA and Ambac was relatively limited and, as a result, we're seeing limited relief from the lack of worries today," Warne said.
She added that the news was canceled out by concerns raised by an International Monetary Fund report that said Canadian economic growth will slow to 1.8 percent this year. The report also noted that there is a risk of an even steeper slowdown as troubles in the U.S. housing sector infect the rest of the economy.
Elsewhere, Medicure Inc MPH.TO skidded 85.6 percent, making it the biggest percentage loser, after the small biotechnology company said the Phase 3 trial for its MC-1 heart drug did not meet its primary endpoint. Medicure ended down 69 Canadian cents at 12 Canadian cents.
Frontera Copper Corp FCC.TO stumbled after the company warned that first-quarter copper production at its Piedras Verdes operations in Mexico would fall. Shares of the miner dropped 70 Canadian cents, or 12.3 percent, to C$5.00.
Investors were also looking ahead to the federal budget due to be released on Tuesday and hopes for good news for investors helped Bay Street's rally.
"My view is that this government has been rather disappointing for investors up until now, but it would be nice to see something in the form of a capital gains tax reduction," said Michael Sprung, president at Sprung & Co. Investment Counsel.
Market volume was 371 million shares worth C$6.2 billion. Advancers outpaced decliners 997 to 653. The blue chip S&P/TSX 60 index .TSE60 closed up 5.66 points, or 0.71 percent, at 803.18.
In New York, stocks also jumped amid relief on signs that MBIA and Ambac, the two largest bond insurers, would stabilize. The Dow Jones industrial average .DJI ended up 189.20 points, or 1.53 percent, at 12,570.22 and the Nasdaq Composite Index .IXIC rose 24.13 points, or 1.05 percent, to 2,327.48.
$1=$1.00 Canadian Editing by Peter Galloway