June 1, 2009 / 2:31 PM / 10 years ago

CANADA STOCKS-TSX hits 7-month high as oil shares surge

* TSX up 232.88 points at 10,602.95.

* Energy shares lead with 4 percent surge

* All 10 TSX sectors in higher territory (Adds details and comments)

By Frank Pingue

TORONTO, June 1 (Reuters) - Toronto’s main stock index was up more than 2 percent on Monday morning, reaching its highest level in more than seven months, as a surge in oil prices lit a fire under its energy sector.

Energy shares gained 4 percent as expectations for a global economic recovery helped send oil prices more than 2 percent higher.

Shares of oil company Canadian Natural Resources (CNQ.TO), the biggest contributor to the index’s gains, rose 5.9 percent to C$68.54, followed by EnCana Corp (ECA.TO), up 4.2 percent at C$62.51.

Another factor behind the index’s gain was data released early on Monday that showed Canada’s economy shrank less in the first quarter than was expected by analysts. [ID:N01454666]

“It’s a good start to the week as we’ve gotten through the majority of the earnings season with no big surprises,” said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario.

“And we’ve seen a deceleration of the downturn in the economy, which is sort of what you need as a precursor to start to have the economy improve somewhat.”

At 10:20 a.m. (1420 GMT), the S&P/TSX composite index .GSPTSE was up 232.88 points, or 2.25 percent, at 10,602.95. Earlier it rose to 10,606.14, its highest level since Oct. 14.

All 10 TSX sectors were higher, with financials chipping in with a gain of 2 percent and the information technology group up a comfortable 1.8 percent.

The TSX is now up about nearly 42 percent since falling to a five-year low in March. But some experts warn the rebound may have gone too far too fast, and could force the TSX to unwind some of the gains.

“In the face of some awfully negative news the market has held in remarkably well so that is a good sign,” Chandler said. “But it’s come a long way in a short period of time so I would not be surprised to see it go through a period of digestion.”

$1=$1.08 Canadian Editing by Peter Galloway

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