April 2, 2009 / 9:02 PM / 10 years ago

CANADA STOCKS-TSX rallies to highest close since Jan 9

* TSX rises 131 points to 9,073.14

* Extends rally for third straight day

* Banks and energy issues drive gain (Adds details, comments, official numbers)

By Frank Pingue

TORONTO, April 2 (Reuters) - Toronto’s main stock index shot to its highest close in nearly three months on Thursday on hopes that actions agreed to at the G20 summit in London would help restore global growth.

News out of the G20, which included a trillion-dollar deal to help combat the global financial crisis, sparked a surge in oil prices and opened the door for the resource-heavy TSX to record its third straight day of gains. [ID:nL1230573]

Shares of Canadian Natural Resources (CNQ.TO) rallied 5 percent to close at C$53.38, while Suncor Energy (SU.TO) rose 5 percent to C$30.00.

“There’s a little bit of confidence coming back into the market so people are putting some cash to work, but they are not sure if it’s a short-covering rally or if it’s the real McCoy,” said Irwin Michael, portfolio manager at ABC Funds.

“So certain investors are giving the market the benefit of the doubt and they are putting their money to work.”

Another key driver behind the rally was changes to U.S. bank accounting rules, which are expected to help the financial system stabilize in the short term and help balance sheets of financial companies. [ID:nN02355900]

Shares of insurer Manulife Financial (MFC.TO), which spearheaded the latest TSX rally, rose 10.7 percent to C$16.69, while Royal Bank of Canada (RY.TO) rose 0.85 percent to C$37.97.

The S&P/TSX composite index .GSPTSE rose 131.32 points, or 1.47 percent, to close at 9,073.14, its highest closing level since Jan. 9.

Nine of the TSX’s 10 main sectors ended higher, led by a 4.36 percent advance by the energy sector. The financials index rallied 2.5 percent.

The materials sector, home to resource companies, fell 4.27 percent, due mainly to a slide in shares of gold miners as the price of gold dropped on renewed talk of gold sales by the International Monetary Fund. [ID:nL2201177]

The latest overall rally in the TSX surprised many experts, especially since it rose on Tuesday in a move attributed to month-end, and then climbed again on Wednesday, helped in large part by a bank rally sparked by better than expected U.S. data. That left it ripe for a pullback.

“The market was probably very much oversold and probably could become overbought in the short run,” said Michael. “But nonetheless this is what we are going to have to expect over the next quarter or two, incredible volatility.”

$1=$1.24 Canadian Reporting by Frank Pingue; editing by Rob Wilson

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