* Higher commodity prices help propel rally
* Concern about U.S. auto bailout weighs on financials
* Toronto market has advanced in 3 of last 4 sessions (Adds details and comments)
By Frank Pingue
TORONTO, Dec 10 (Reuters) - Toronto’s main stock index ended higher on Wednesday as signs of reduced oil supplies sparked a rally in energy shares, but financials capped the gains as they tumbled on economic worries and concerns about the fate of a bailout for U.S. automakers.
Oil prices increased 3 percent as Saudi Arabia told major customers it was reducing supplies substantially next month in a move that could bring the kingdom’s output below its implied OPEC target. That helped the energy sector rally 5.9 percent.
But nagging concerns about Canada’s economy, coupled with uncertainty over the fate of a rescue plan for U.S. automakers — which bogged down Wednesday in political wrangling in Washington — sent another chill through financials, which make up about a third of the broader TSX index.
The S&P/TSX composite index .GSPTSE jumped 236.44 points, or 2.82 percent, to 8,634.00, with six of its 10 main sectors ending higher.
The index is now up 6.4 percent this week after sagging 12.4 percent last week.
“There seems to be sort of a slow sentiment shift starting to take place,” said Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management Ltd in Calgary. “But we’ve seen it before and things can change very quickly and very hard to the downside.”
The rise in oil prices, which came on the heels of a drop of nearly 4 percent in the previous session, paved the way for some big-name companies to contribute to the broader index’s rise.
Another key driver behind the market’s gain were rallies in shares of the world’s top fertilizer producers, which jumped a day after announcing production cuts that could help offer some support to fertilizer prices.
Potash Corp of Saskatchewan POT.TO jumped 12.2 percent to C$87.60, while Agrium Inc AGU.TO shares ended up 10.6 percent at C$38.58.
Financials dropped 1.69 percent on worry that a bailout for the U.S. auto industry might not go ahead and on nagging concerns about the economy as the Bank of Canada declared for the first time earlier this week that Canada is entering a recession.
“Financials took a bit of their direction from the U.S. where there seems to be a lot of volatility related to whether the auto industry will get bailed out or not,” said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri. “There’s no question that ties into the financial services companies.”
On Wall Street, stocks ended higher after a choppy session as the rebound in commodity prices lent support to energy, mining and materials shares.
The Dow Jones industrial average .DJI rose 70.09 points, or 0.81 percent, to 8,761.42, while the Nasdaq Composite Index .IXIC ended up 18.14 points, or 1.17 percent, at 1,565.48.
$1=$1.26 Canadian Editing by Peter Galloway