December 8, 2008 / 10:09 PM / 10 years ago

CANADA STOCKS-TSX rides higher oil prices to 450-point gain

* Rise in oil prices sparks surge in Toronto stocks

* Talk of stimulus measures helps restore sentiment

* Toronto rally follows sharp skid last week (Adds details and comments)

By Frank Pingue

TORONTO, Dec 8 (Reuters) - Toronto’s main stock index closed at its highest level in more than a week on Monday in a broad-based rally supported by a rebound in oil prices and optimism that stimulus measures around the globe would help avert a deeper economic slide.

The resource-heavy index, coming off a 12 percent skid last week, surged at the open and hung on to the bulk of its gains as the price of oil bounced off the four-year low set last week.

Adding to the rally’s momentum was a pledge by U.S. President-elect Barack Obama to invest in a massive infrastructure plan to help bolster the anemic U.S. economy.

Stock markets around the world rebounded on Monday, helped by several governments reinforcing their plans for countering the global economic crisis, while higher oil prices gave an added boost to stock indexes that have a heavy energy weighting.

“For the first time in a long time commodities are actually showing signs that they actually have a pulse,” said Levente Mady, broker at MF Global Canada in Vancouver. “So commodities and equity markets are the two worlds that are kind of helping the TSX pop up substantially more than the U.S. and some of the other markets.”

The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed 450.09 points, or 5.55 percent, higher at 8,567.12, with all of its 10 main sectors up.

A 7 percent surge in oil prices following a 25 percent drop last week helped light a fire under the index’s heavily weighted energy sector, which finished the session 7.45 percent higher.

Deepening supply cuts from oil supplier Saudi Arabia and prospects that the Organization of the Petroleum Exporting Countries will agree to further trim output fueled the rise.

Shares of oil company EnCana Corp (ECA.TO) shot 9.34 percent higher to C$55.61 and were the biggest driver of the TSX’s gain. Suncor Energy (SU.TO) rallied 6.59 percent to close at C$23.30.

Another catalyst for the market’s rally were comments from Obama, who over the weekend outlined plans for the largest infrastructure investment since the 1950s in a bid to create at least 2.5 million jobs by 2011. Investors were also hopeful a financial lifeline for ailing U.S. automakers could be near.

Gold-mining stocks propelled the materials group to a 9.22 percent gain, the biggest gain of all sectors, as the price of gold surged on inflation fears given the large amounts of money being pumped into the global economy.

Shares of Barrick Gold Corp (ABX.TO) rallied 7 percent to C$34.35, while Goldcorp (G.TO) shares jumped 8.8 percent to close at C$30.30.

Investors will also be keeping a close watch on the Bank of Canada, which is scheduled to announce its decision on interest rates at 9:00 a.m. (1400 GMT) on Tuesday.

A Reuters poll taken on Friday showed Canada’s 12 primary securities dealers expect the bank to lower its key overnight rate, currently at 2.25 percent, by at least 50 basis points.

The market has priced in a 60 percent probability of a 75 basis point rate cut, according to a Reuters calculation of implied rates based on overnight index swaps. BOCWATCH

“Right now the debate is whether it’s going to be 50 basis points or 75 basis points,” said Julie Brough, vice president at Morgan Meighen & Associates. “If it’s different from either one of those, then I would say it will matter, but I would say the probability of that is pretty low.”

In the United States, equities also rallied on hopes that Obama’s proposed spending plan will keep the economy from a steeper decline.

The Dow Jones industrial average .DJI rose 298.76 points, or 3.46 percent, to 8,934.18, while the Nasdaq Composite Index .IXIC ended up 62.43 points, or 4.14 percent, at 1,571.74.

$1=$1.25 Canadian Reporting by Frank Pingue; editing by Peter Galloway

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