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* TSX rises 124 points to 8,720.39
* Banks and insurers power latest rise
* First monthly gain since August 2008 (Adds details, comments and official numbers)
By Frank Pingue
TORONTO, March 31 (Reuters) - Toronto's main stock index shot higher on Tuesday as upbeat news from European financial institutions lifted sentiment, capping off the first monthly gain for the TSX since August.
Financial shares at home and abroad rose after Barclays Bank (BARC.L) declined to take part in a British government asset-protection plan and Belgian-Dutch Fortis NV FOR.BR outlined its future as a viable insurance group. [ID:nLR449530] and [ID:nLV380962]
Shares of Royal Bank of Canada (RY.TO), the key driver of the latest gain, shot 2.7 percent higher to close at C$36.78, while Toronto-Dominion Bank (TD.TO) rose 3.5 percent to end the session at C$43.46.
"The markets in general and the TSX have been beaten down to such extreme levels due to this unprecedented panic that we saw," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver.
"So this may be the first stage of a rebound that could take indices fairly higher from these levels -- and it's going to be volatile. But the fact that the TSX had its first positive month in seven is certainly a positive sign," Picardo said.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE rose 124.17 points, or 1.44 percent, to close at 8,720.39. At one point in the session it was up 2.15 percent.
The TSX rose 7.4 percent in March, which ended a string of six consecutive monthly declines that saw the index lose 41 percent of its value.
While ending the month higher, the TSX had fallen early in March to its lowest level in over five years and only turned around when a number of U.S. banks said they were profitable in January and February.
Nine of the TSX's 10 main sectors ended the session higher, led by a 3 percent jump by financials, followed by a 1.34 percent rally by the energy group. The two sectors account for about 55 percent of the overall index.
Helping lift the energy sector was a jump of 3 percent in the price of oil, a key Canadian export. The rise in crude prices, however, was capped by U.S. data that indicated the depth of the recession in the world's top energy consumer.
EnCana Corp (ECA.TO) rose 1.2 percent to C$51.60, while Nexen Inc NXY.TO rose 1.8 percent to C$21.38.
Some of Tuesday's gains were also attributed to month-end, when investors tend to rebalance their portfolios.
Data released before the TSX opened showed the Canadian economy, which contracted during the fourth quarter of 2008, shrank in January and put the country on track for one of its worst ever economic performances in the first quarter. [ID:N31403813]
$1=$1.26 Canadian Additional reporting by Jennifer Kwan; editing by Rob Wilson