UPDATE 4-Toronto stocks soar as U.S. bailout hopes revive

Tue Sep 30, 2008 4:55pm EDT
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*TSX rallies 4 percent after huge drop on Monday

*Energy sector climbs 5.8 percent on stronger oil

*Hopes for U.S. bailout plan boost financial services

(Adds details, analyst's comments, updates figures)

TORONTO, Sept 30 (Reuters) - The Toronto Stock Exchange's main index jumped more than 4 percent on Tuesday, recouping more than half of the previous day's heavy losses as energy stocks got a boost from crude oil's recovery, while hopes for a revived Wall Street bailout plan calmed investor nerves.

Following a near 7 percent tumble on Monday after U.S. lawmakers rejected a proposed $700 billion bailout for the financial sector, the recovery spanned all 10 TSX subgroups, led by a 5.8 percent surge in energy stocks and a 5.4 percent rise in financial issues.

"Optimism springs eternal I guess, and (the vote) was pretty close. People probably feel that the next time around it will pass simply because the reasons to vote against it were pretty weak," said John Kinsey, a portfolio manager at Caldwell Securities.

The S&P/TSX composite index .GSPTSE rose 467.83 points, or 4.15 percent, to close at 11,752.90.

Expectations that lawmakers will revisit the bailout plan drove oil up more than $4 a barrel to above the key $100 level, boosting companies such as Canadian Natural Resources CNQ.TO, which rose 11.8 percent to C$73, and Nexen Inc NXY.TO, which gained 10.3 percent to C$24.70.

Among financials, Bank of Montreal BMO.TO led the way, rising 9.4 percent to C$45.95, while Canadian Imperial Bank of Commerce CM.TO jumped 7.4 percent to C$61.08.

Kinsey said some of the bounce could be attributed to bargain hunters rushing in for quality stocks, and also to buying associated with fund managers rebalancing their portfolios ahead of the end of the quarter. ($1=$1.06 Canadian) (Reporting by Cameron French; Editing by Peter Galloway)