October 14, 2008 / 3:46 PM / 10 years ago

UPDATE 2-Toronto stocks' huge gain halved by midmorning

* Investors cheer U.S. plan to plow $250 bln into banks

* Index up 1,600 points at open, biggest one-day gain

* Financials, oil and gas groups lead (Adds details, analyst’s comments)

By Ka Yan Ng

TORONTO, Oct 14 (Reuters) - The Toronto Stock Exchange’s main index was strongly higher at midmorning on Tuesday but well off the record-breaking gain it made at the start of trading as it played catch-up with Monday’s monster surge on Wall Street and welcomed a U.S. plan to inject $250 billion into banks.

Canadian markets were closed on Monday for Thanksgiving Day.

The Toronto index raced up more than 1,600 points shortly after the market open, its biggest intraday gain ever, following big gains on world stock markets on Monday and continuing strength on Tuesday as investor jitters about the stability of the financial system eased.

The U.S. plan to plow $250 billion into its banks, following similar measures in Europe, is designed to get them lending to each other again. [ID:nTRS000084]

Shortly after 11:00 a.m. (1500 GMT), the S&P/TSX composite index .GSPTSE was up 877.37 points, or 9.68 percent, at 9,942.53. All 10 sectors were higher. Right after the open the index was up a record-breaking 18 percent, and recovered all its gains from last week’s slump in mere minutes.

But the fading of euphoria around the rescue plan may cut the index’s gains as the day wears on, one analyst cautioned.

“Everybody is excited today,” said Andrew Martyn, portfolio manager at Davis-Rea. “It’s a huge, spectacular run but I think as time goes on, especially as you get into the midmorning and early afternoon, you may find some people take advantage of some of these prices and tend to hit some bids.”

The financials group, which accounts for a third of the Toronto market, led the rally, up 11 percent. Toronto-Dominion Bank(TD.TO) jumped 18 percent to C$61.54, and Sun Life(SLF.TO) was up 17 percent at C$30.23.

Manulife Financial(MFC.TO) was off earlier highs, up 14 percent to C$30.36, as Canada’s biggest insurer said on Monday it expects credit losses related to the global financial crisis to reduce earnings by about C$250 million in the third quarter. [ID:nN13471490] Manulife(MFC.TO) said on Tuesday it has no plans to cut its dividend. [ID:nN14509297]

The U.S. plan broadly boosted sentiment in commodities as well, with the energy sector up 12 percent. The price of oil retreated at midmorning, off more than $1 after rising more than $3 earlier, and held just above $80 a barrel. [ID:nN14520040]

Talisman EnergyTLM.TO rose 25 percent to C$12.40, while NexenNXY.TO gained 21 percent to C$16.93.

Raymond James revised its ratings on oil and gas companies [ID:nnWNAS4663] [ID:nnWNAS4660] and 10 trusts [ID:nWNAS4661]. Some of the changes announced by the brokerage included raising Suncor Energy(SU.TO) to “strong buy” from “outperform” and cutting the share-price target on Canadian Oil Sands Trust COS_u.TO to C$53 from C$60.

Meanwhile, amid a firmer market on Tuesday, Canadians are voting in an election that will likely produce the third minority government in four years and give Conservative Prime Minister Stephen Harper a renewed mandate. [ID:nN13488548]

Bay Street has paid little attention to the campaign leading to the election as sagging markets and clogged credit markets have stolen headlines.

$1=$1.15 Canadian Reporting by Ka Yan Ng; Editing by Peter Galloway

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