October 8, 2008 / 8:56 PM / 9 years ago

UPDATE 3-Toronto stocks buoyed by surprise rate cuts

* Bank of Canada’s rate cut lifts sentiment

* Materials sector rallies, led by gold stocks (Adds details, quotes, and official close)

TORONTO, Oct 8 (Reuters) - The Toronto Stock Exchange’s main index ended more than 200 points higher on Wednesday after a volatile session, as a surprise coordinated interest rate cut by several central banks restored some confidence to investors and lit a fire under mining stocks.

After five straight days of steep losses and an initial drop at the open on Wednesday, buyers swept in to pick up bargains after the Bank of Canada cut its key interest rate by a half percentage point to 2.5 percent, part of a concerted effort by central banks. [ID:nN08492471]

However, the market swung wildly all day, spending much the session in the red, as weaker oil prices and continued worries about the possibility of a global recession kept investors on a hair trigger.

“Overall, we’re just seeing an overreactive market to every small movement, whether it be interest rates or commodity prices or whatever,” said Michael Sprung, president at Sprung & Co. Investment Counsel.

The S&P/TSX composite index .GSPTSE ended the session up 225.84 points, or 2.3 percent, at 10,055.39.

Seven of its 10 subgroups rose, led by a massive 12.27 percent gain for the mining-heavy materials sector.

Gold producers such as Barrick Gold (ABX.TO) and Kinross Gold (K.TO) led the way, rising 19 percent and 23 percent respectively as gold prices pushed above $900 an ounce for the first time in more than a week.

Barrick ended at $40.05, while Kinross closed at C$18.75.

Analysts said the move was largely a rebound from the hard selling mining companies have experienced recently as concerns about a recession that could strip demand for metals subsided a bit.

Also in the sector, fertilizer producer Potash Corp (POT.TO) leaped 14 percent to C$110.50, while base metals producer Inmet Mining IMN.TO gained 17 percent to C$42.45.

The energy sector fell 0.51 percent on the back of weaker oil prices, but ended well off its sessional lows.

Smaller players led the oil stock decline, with Paramount Resources (POU.TO) dropping 7.7 percent to C$9.20, and InterOil Corp IOL.TO falling 25.3 percent to C$19.55. Offsetting those losses was Canadian Natural Resources (CNQ.TO), which climbed 3.1 percent to C$57.00.

$1=$1.12 Canadian Reporting by Cameron French; Editing by Peter Galloway

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