TORONTO (Reuters) - The Toronto Stock Exchange’s main index gained 3.5 percent on Monday, with resource issues supported by rising oil prices and the U.S. government’s rescue plan for banking giant Citigroup lifting market sentiment, particularly in the financial group.
The energy sector forged ahead 7.1 percent, supported by the oil price gain. Crude rose more than 8 percent as investors considered the prospect of a further OPEC supply cut and as stock markets rallied on the Citigroup news.
“The news filtering through the system that Citi has received some aid is a great relief to the entire banking community,” said Michael Sprung, president at Sprung & Co. Investment Counsel. “There was certainly severe fear of the effects of what would happen if Citi were to go down.”
Canadian Natural Resources gained 8.2 percent to C$45, while Petro-Canada rose 10 percent to C$24.75.
But advances in the materials sector evaporated by the session’s end as profit-taking ensued after gold prices hit a five-week high. The group was one of the main sources of early strength but ended modestly lower, down 0.54 percent.
Goldcorp trimmed gains, ending up 1.6 percent to C$31.52. But shares of NovaGold plunged nearly 70 percent to 72 Canadian cents after it said it was facing a cash crunch and had suspended operations at its only producing mine.
The S&P/TSX composite index closed up 285.48 points, or 3.5 percent, at 8,440.87. Five sectors advanced, including the heavily weighted energy and financial groups. Information technology and utilities were among the decliners.
The Toronto gains build on Friday’s broad 5 percent rise, but some analysts were skeptical that the index could hang on to its gains given recent market patterns.
“I don’t have the confidence that any uptick in the market is sustainable until the financial problems are cured, meaning that the banks are stabilized in the U.S.,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
“I feel that a lot of the longer-term money, for lack of a better word, is still on the sidelines.”
The Citigroup news helped ease overall investor concern that the global financial system would be in peril if the big U.S. bank collapsed, and reversed initial pressure on Toronto’s banking sector brought on by an earnings warning from Royal Bank of Canada.
“I think people are now taking it in stride,” said Sprung.
In a way the market is becoming more immune to warnings in recognition that it takes times for bad loans to work their way through the system, he added.
The financial group advanced 4.68 percent, as Royal Bank, the third Canadian bank to provide a warning in the past week, gained 6.91 percent to C$39.
Other bank stocks followed suit. Bank of Montreal, which finished up 5.3 percent at C$34.12, is the first bank to report results on Tuesday.
In the United States, Wall Street marked its best two-day run since the aftermath of the 1987 stock market crash, as the Citigroup news sparked a massive relief rally.
The Dow Jones industrial average raced up 396.97 points, or 4.93 percent, to 8,443.39. The Nasdaq composite index leaped 87.67 points, or 6.33 percent, to 1,472.02.
Reporting by Ka Yan Ng; editing by Rob Wilson