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* TSX climbs 3.9 percent in resource-led rally
* Materials and energy stocks make biggest gains (Adds comments, details)
By Jeffrey Jones
CALGARY, Alberta, Dec 29 (Reuters) - Toronto's main stock index jumped nearly 4 percent on Monday, led by resource producers, as oil and gold prices climbed on intensifying Middle East violence.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE rose 326.74 points, or 3.9 percent, to close at 8,637.29, its highest level since Dec. 16.
Among Toronto's big gainers were shares in miners Barrick Gold (ABX.TO) and Goldcorp (G.TO), both up more than 10 percent, and oil producers Nexen Inc NXY.TO and Petro-Canada PCA.TO, which climbed 7 percent and 6 percent respectively.
They helped lift the materials subgroup 10.2 percent and the energy producers 5.7 percent. All 10 TSX subgroups finished higher on the day.
"Everything goes in tandem with it. You get one or two of the big names up, and everybody else likes to follow suit a little bit," said portfolio manager Adrian Mastracci of KCM Wealth Management in Vancouver.
"But I think it's short term. If anybody had to, I think I would be selling some things as opposed to buying some things right now."
The jump was in contrast to action on Wall Street, where stocks sank after Kuwait pulled out of a venture with Dow Chemical (DOW.N) due to the global recession, threatening Dow's takeover of Rohm & Haas ROH.N.
Commodity prices rallied on concern that Israeli air attacks on Gaza on the third day of a deadly offensive could lead to disruptions in crude supplies from the Middle East.
Gold ended up $4.10 in New York to close at $875 an ounce, paring earlier gains, and oil jumped $2.31, or 6 percent, to finish at $40.02 a barrel.
Barrick shares jumped C$4.28 to C$45.34, Goldcorp gained C$3.95 to C$38.50, Nexen climbed C$1.42 to C$20.43 and Petro-Canada rose C$1.54 to C$26.99.
Mastracci said the rise in Toronto stocks is likely to be short-lived as more signs of the economic malaise surface.
"More bad news is coming, not necessarily this week but in the very short term." he said. "That will drive the market, in my view, a little further down."
He pointed to the retail sector as one particularly vulnerable to further losses.
The Toronto index has suffered a nearly 40 percent drop in 2008. The traditional pre-Christmas rally did not come to pass this year because of worries about the economy.
On Monday, the blue chip S&P/TSX 60 index .TSE60 closed 18.18 points, or 3.8 percent, higher at 520.96.
In New York, the Dow Jones industrial average .DJI fell 31.62 points, or 0.37 percent, to 8,483.93, while the Nasdaq composite index .IXIC ended down 19.92 points, or 1.3 percent, at 1,510.32.
$1=$1.22 Canadian Reporting by Jeffrey Jones; editing by Rob Wilson