October 9, 2008 / 4:36 PM / 10 years ago

UPDATE 2-Toronto stocks gain as oil shares rise

* Energy sector gains, had been down all week

* Gold subindex retreats after two-day rally

(Adds analyst comment and details)

TORONTO, Oct 9 (Reuters) - The Toronto Stock Exchange’s main index was higher at midday on Thursday after see-sawing throughout the morning on erratic swings in the energy group as the price of oil declined and investors mulled how much the credit crisis would hurt the global economy.

The energy sector initially led the rally, bouncing from sharp losses all week. Those strong gains were cut in half as oil fell towards $86, pressured by expectations that demand will fall sharply if the credit crisis pushes the global economy into recession. [ID:nSP359316]

EnCana (ECA.TO) was up 1.5 percent to $52.99, while Nexen NXY.TO was up 1.4 percent at C$17.20, both halving early gains.

The index had popped more than 300 points higher right after the open but the rally fizzled and then again reversed course. Wild swings on the index have been a regular occurrence recently as concerns about the credit crunch gained momentum.

Shortly after 11:45 a.m. (1545 GMT), the S&P/TSX composite index .GSPTSE was up 114.56 points, or 1,14 percent, at 10,170.87. Eight of 10 sectors were in positive territory.

“I don’t think it necessarily says we’re out of the woods as far as the market as a whole, but it’s what I would call a relief rally,” said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario.

“We’ll get through this relief rally and then I think the market will start to look forward and think in terms of how much of this damage that has been done is going to trickle down to the overall economy as a whole, and how much of an impact and for how long.”

The financials group was dragged lower by Manulife (MFC.TO), which dropped 5.7 percent at C$32.17. But Bank of Montreal (BMO.TO) was up 1 percent at C$39.41, and Great-West Lifeco (GWO.TO) jumped 3.9 percent to C$29.40.

Earlier, a World Economic Forum survey said that Canada has the world’s soundest banking system, followed by Sweden, Luxembourg and Australia. [ID:nSYD394240]

Finance Minister Jim Flaherty said he sees no need to bail out the country’s banks, but that he is looking at ways to ease “severe restrictions” in lending. [ID:nN09294805]

The materials sector, which includes miners and other non-energy commodities, was pulled down by the falling price of gold.

The gold subindex, which has had a two-day rally, fell as the price of gold fell below $900 an ounce as investors locked in profits after a rise in almost $20 an ounce the day before. [ID:nL9239336], while most base metals were steady. [ID:nL9453347]

Kinross Gold (K.TO) was off 2.9 percent to C$18.20, while Yamana Gold (YRI.TO) lost 3.7 percent to C$8.12.

But Potash Corp of Saskatchewan POT.TO was again one of the bright spots of the materials group. It was amongst the top net gainers, up nearly 7 percent at C$118.09.

Maple Leaf Foods (MFI.TO) came under renewed pressure, down 6.2 percent to C$7.26, after the company halted distribution for a second time at a Toronto plant at the center of a tainted-meat crisis.

Canadian investigators found four meat products infected with listeria in a plant that was linked to at least 20 deaths. [ID:nN09257769]

Meanwhile, autoparts maker Magna International MGa.TO confirmed its intention to build a plant in Russia, denying a local newspaper report it was likely to drop the project. [ID:nL9623787] Magna was off 1 percent at $44.57.

Biovail BVF.TO slipped 4.3 percent to C$9.47 after it was named in a new class action lawsuit that claims that it misled investors. [ID:nN09292761] ($1=$1.12 Canadian) (Reporting by Ka Yan Ng and Jennifer Kwan; Editing by Peter Galloway)

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