TORONTO (Reuters) - Toronto's main stock index moved higher for a third straight session on Monday, helped by economic recovery hopes that lifted the financial group.
Similar to Friday's session, financials were almost single-handedly responsible for propping up the TSX index -- with a healthy 2.23 percent gain -- as six of the other main sectors fell.
Steady optimism triggered last week by the Bank of Canada's declaration that the recession was over has buoyed the financial sector, which has risen nearly 7 percent since the rosier outlook was announced. Eight of the 10 most influential gainers were from the financial group.
Insurers were among the biggest winners, with Manulife Financial up 5.72 percent at C$26.05, while Sun Life rose 8.79 percent to C$37.98.
"It's primarily the financials. They're putting on a good show today but the oils and the materials seem to have faded on us here," said John Kinsey, portfolio manager at Caldwell Securities Ltd.
Canada's big four life insurers now look to be better bets than either their U.S. rivals or the big Canadian banks as a surging stock market brings profits bouncing higher after three awful quarters. Most of them will report results next week.
However, big banks also made strides, with Toronto-Dominion Bank rising 1.54 percent to C$63.21, while Bank of Nova Scotia climbing 1.7 percent to C$46.10.
The financial group stands to be one of the biggest beneficiaries of a return to economic growth because it may mean less pressure on loan loss provisions, money set aside for bad loans.
The S&P/TSX composite index closed up 69.53 points, or 0.65 percent, at 10,757.43. Earlier the index had risen more than 1 percent, but the gains faded with the materials group.
Materials ended lower, down 0.13 percent, unable to hold on to early gains after the price of gold hit a 6-1/2 week high. Barrick Gold led influential decliners on the overall index, falling 0.81 percent to C$37.80.
Meanwhile, the heavyweight energy group eked out a 0.17 percent gain as prices rose amid strong U.S. homes sales data that raised optimism about a turnaround in the economy.
Canadian Oil Sands Trust was also one of the key risers, up 1.5 percent at C$27.04, ahead of reporting its earnings which were due after the market close on Monday.
The brightening economic horizon has pushed investors to take out some key technical levels, possibly paving the way for more gains.
"The technicals point that way. The TSX/60 above 650 is quite bullish. A similar pattern with the broader market above 10,700, the recent high ... is also seen as a very good positive," said Francis Campeau, a broker at MF Global Canada, in Montreal.
"The market tone has really changed."
But both he and Kinsey agree that the TSX may be at risk of a retreat because the index has risen in nine of the last 11 sessions for a gain of 8.6 percent.
"We may get a bit of a pullback here after two very strong weeks. There could be a correction, but I think, on balance, it'll be quiet," said Kinsey.
Reporting by Ka Yan Ng; editing by Rob Wilson