TORONTO (Reuters) - Canada's main stock index recorded one of its biggest percentage jumps of the year on Tuesday after robust U.S. data and comments from major central banks alleviated concerns about the economic recovery and monetary policy.
A surge in shares of financial companies, coupled with gains in every other major sector, helped the market bounce back from a big loss in the previous session.
Data showed orders for long-lasting U.S. manufactured goods rose more than expected in May and a gauge of planned business spending increased for a third straight month, the latest signs of a pick-up in economic activity in the United States.
The market was further supported by a 47 percent jump in CML HealthCare Inc CLC.TO after LifeLabs Medical Laboratory Services said it would acquire the medical diagnostic services provider in a deal valued at about C$965 million ($917 million).
Toronto stocks have been under pressure since the Fed signaled last week it is likely to tighten monetary policy. The pressure was exacerbated by worries about liquidity and economic growth in China, a major market for Canadian resources.
China's central bank said it will not turn the screws too hard on banks in its drive to curb easy credit, seeking to soothe fears of a banking crisis that had driven Chinese stocks to their lowest level in nearly 4-1/2 years.
In the United States, two Federal officials played down the prospect of a speedy end to the U.S. central bank's stimulus program.
"The selloff over the past week was threatening to turn ugly, but today's advances point to the fact that the concerns of the last few days have dissipated to some extent," said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver.
"China's central bank does have the muscle to dictate which way it wants things to go," he added. "Now that they've come out and reassured the markets, there's a feeling that they have things under control."
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 168.56 points, or 1.42 percent, at 12,005.42. All of the 10 main sectors on the index were higher.
The materials sector, which includes mining stocks, gained 1.1 percent. Miner Teck Resources Ltd TCKb.TO rose 3.4 percent to C$21.94.
Financials, the index's most heavily weighted sector, were up 1.3 percent. Toronto-Dominion Bank (TD.TO) climbed 1.9 percent to C$82.79 and played the biggest role of any single stock in leading the index higher.
Investors also digested news that Royal Bank of Canada (RY.TO) and some influential fund managers plan to set up a new stock exchange to challenge the dominant TMX Group Ltd (X.TO), one that would limit the role of controversial high-frequency trading strategies.
Smartphone maker BlackBerry (BB.TO) advanced 3.9 percent to C$15.32 as expectations for its quarterly report on Friday rose.
In other company news, Scout Capital Management, a U.S. hedge fund, said it is urging Tim Hortons THI.TO to increase its debt levels so it can fund a share buyback. Shares of the coffee and doughnuts chain climbed 3.2 percent to C$56.29.
CML's rise to C$10.60 helped the healthcare sector surge 13.5 percent.
Editing by Peter Galloway