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TORONTO (Reuters) - The Toronto Stock Exchange's main index ended more than 200 points higher on Wednesday after a volatile session, as a surprise, co-ordinated interest rate cut by several central banks restored some confidence to investors and lit a fire under mining stocks.
After five straight days of steep losses and an initial drop at the open on Wednesday, buyers swept in to pick up bargains after the Bank of Canada cut its key interest rate by a half percentage point to 2.5 percent, part of a concerted effort by central banks.
However, the market swung wildly all day, spending much of the session in the red, as weaker oil prices and continued worries about the possibility of a global recession kept investors on a hair trigger.
"Overall, we're just seeing an overreactive market to every small movement, whether it be interest rates or commodity prices or whatever," said Michael Sprung, president of Sprung & Co. Investment Counsel.
The S&P/TSX composite index ended the session up 226.76 points, or 2.31 percent, at 10,056.31.
Seven of its 10 subgroups rose, led by a massive 12.27 percent gain for the mining-heavy materials sector.
Gold producers such as Barrick Gold and Kinross Gold led the way, rising 19 percent and 23 percent respectively as gold prices pushed above $900 an ounce for the first time in more than a week.
Barrick ended at $40.05, while Kinross closed at C$18.75.
Analysts said the move was largely a rebound from the hard selling miners have experienced recently as concerns that a global recession could slash demand for metals eased a bit.
Also in the sector, fertilizer producer Potash Corp leaped 14 percent to C$110.50, while base metals producer Inmet Mining gained 17 percent to C$42.45.
The wild market swings contributed to an unusually high trading volume of 768.7 million shares, valued at C$11.3 billion.
Despite the index's rise, declining issues outnumbered advancers 1,180 to 530, suggesting investors were rushing back in to larger blue-chip stocks and avoiding smaller, higher-risk issues.
Independent strategist Elvis Picardo said the mining rebound, in particular the jump in gold stocks, was a sign the market might be starting to shed the "sell everything" panic that has gripped it in the past week.
Typically, gold is seen as a safe haven in times of turmoil, and the sharp rise in the stocks suggests investors are again starting to look at the individual merits of certain sectors, rather than grouping them all together, he said.
"I honestly think there's some sense of rationality coming back into the markets," said Picardo.
The technology group rose 2.99 percent, boosted by BlackBerry maker Research In Motion, which climbed 5.4 percent to C$64.19.
The energy sector slid 0.51 percent on the back of weaker oil prices, but ended well off its sessional lows.
Smaller players led the decline, with Paramount Resources dropping 7.7 percent to C$9.20, and InterOil Corp falling 25.3 percent to C$19.55. Offsetting those losses was Canadian Natural Resources, which climbed 3.1 percent to C$57.00.
The blue-chip S&P/TSX 60 rose 19.19 points, or 3.24 percent, to 611.44.
U.S. markets continued to fall, as the Dow Jones industrial average dropped 189.01 points, or 2.0 percent, to 9,258.10, while the tech-heavy Nasdaq composite slid 14.55 points, or 0.83 percent, to 1,740.33.
Reporting by Cameron French; editing by Rob Wilson