* Energy issues rise, oil bounce reinforces gains
* Canadian Natural, Suncor, EnCana are top three movers
* Financials push higher; Manulife weighs (Updates to late morning, adds analyst comments)
TORONTO, Jan 2 (Reuters) - Toronto’s main stock index climbed nearly 2 percent on Friday as early broad-based weakness started to reverse, led by strength in resources, despite underlying softness in commodity prices.
The oil and gas sector gained 4.6 percent despite an earlier weaker crude price. By late morning, the price of oil bounced more than $2 a barrel to above $46, reinforcing the energy sector’s gains.
The heavily weighted energy group has typically followed gyrations in oil but top names such as EnCana (ECA.TO), Canadian Natural Resources (CNQ.TO), and Suncor Energy (SU.TO) — the top three index movers — claimed solid gains early in the first trading session of the year.
Canadian Natural was up 5 percent at C$51.21, while EnCana gained 3.6 percent to C$59.01. Suncor added 5.1 percent to C$24.95.
Materials clawed back from early weakness, climbing 2.3 percent. Initially a sliding gold price put pressure on the influential gold miners, but base metals prices, which were off to a better start in 2009, helped to overcome losses.
“I think right now I would say that most of the stocks are more related to the stock market as opposed to the underlying commodities,” said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
“I think we’ve discounted so much bad news.”
At 11:30 a.m. (1630 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was up 1.92 percent, or 173.06 points, at 9,160.76.
The index is looking to extend its late-year rally after three straight sessions of triple-digit gains ahead of the New Year’s Day break.
The index finished 2008 on a positive note, up 2 percent, but overall it was the worst year for Canadian stocks since the Great Depression — a full-year drop of 35 percent.
Nine of the TSX’s 10 main groups were higher, with the lone decliner, consumer staples, off 0.6 percent.
The financial sector, which accounts for about a third of the index, moved into positive territory but Manulife Financial (MFC.TO) weighed. It was one of the main losers, down 2.6 percent at C$20.26. The Big Six banks, which were all down 1 percent or more earlier, saw four push into positive territory by midmorning.
There is some optimism with the new year and for a new U.S. president to take office soon with policies that are hoped to help the ailing global economy, Nakamoto said.
“Investors are focusing more on changes that may happen with the new administration coming in, and not looking at the current data. I think it will be more a matter of what (U.S. President-elect Barack Obama) does or starts to say that is going to drive the market in the short term,” he said.
“Ultimately, it has to come through in terms of better economic numbers and earnings or the rally, whatever we get, will be taken back pretty quickly.”
A U.S. measure of manufacturing activity fell more than expected to a 28-year low, but had little effect on the TSX on Friday. See [ID:nWEN2173]
Volume is expected to be light following Thursday’s New Year break and ahead of the weekend.
$1=$1.22 Canadian Reporting by Ka Yan Ng; editing by Rob Wilson