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* TSX up 1.97 percent at 8,765.82
* Energy sector rises as oil climbs toward $50/bbl (Adds details, quotes)
By Jennifer Kwan
TORONTO, March 31 (Reuters) - Toronto's main stock index rallied on Tuesday afternoon, boosted by strength in commodity prices and by improved sentiment for banks on reassuring news from European financial institutions.
The Toronto Stock Exchange's heavily weighted financials group climbed along with major U.S. bank stocks, which rose after British bank Barclays (BARC.L) declined to take part in a government asset-protection plan, while Belgian-Dutch group Fortis FOR.BR outlined plans for its future as a viable insurance operation after hefty losses in 2008.
"That may have helped at the margin. Any news that indicates that financials globally are in stronger position than a few months ago can only be positive for financial stocks in general," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver.
At 2:34 p.m. (1834 GMT), the S&P/TSX composite index .GSPTSE was up 169.60 points, or 1.97 percent, at 8,765.82, with eight of its 10 main groups higher.
The rise follows a retreat of more than 2 percent in Monday's session, as troubles in the North American auto sector and the European banking industry rattled investor sentiment.
"Commodities have managed to stabilize after yesterday's meltdown so that's helped the resource sectors rebound," said Fergal Smith, managing market strategist at Action Economics.
The TSX energy sector rose 2.4 percent as oil climbed to near $50 a barrel after Monday's big slide. [ID:nLV397488] EnCana (ECA.TO) rose 2.1 percent to C$52.04.
The resource-laden materials group climbed 1.7 percent, helped by firmness in gold and base metal prices. Barrick Gold (ABX.TO) was up 1 percent at C$41.30.
$1=$1.26 Canadian Reporting by Jennifer Kwan; editing by Rob Wilson