* TSX rises 0.63 percent to 12,649.92
* Materials, banks lead rise; Encana, Potash key decliners
* Investors reassess Chinese rate hike (Adds details, comment)
By Ka Yan Ng
TORONTO, Oct 20 (Reuters) - Toronto’s main stock index rebounded on Wednesday as gold miners and financials were strong performers in a broad rally a day after the index slumped on an unexpected Chinese interest rate hike.
Gold prices rallied as investors assessed the initial reaction to China’s rate hike as overblown, while the greenback weakened, boosting U.S. dollar-denominated commodities and sending the index’s materials sector up more than 1 percent.
“The primary trend is investors are looking to scoop up shares in materials, gold, and companies that could benefit from quantitative easing (by the U.S. Federal Reserve), which at this point is still speculation,” said Youssef Zohny, associate portfolio manager at Van Arbor Asset Management.
Kinross Gold (K.TO) added 1.7 percent to C$18.59, and Teck Resources TCKb.TO gained 3.24 percent to C$45.31.
Financial shares gained 0.72 percent, rising for a fourth straight session and helped in part by higher earnings at U.S. bank Wells Fargo & Co. Toronto-Dominion Bank (TD.TO) rose 1.12 percent to C$76.
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE gained 79.37 points, or 0.63 percent, to 12,649.92, recouping nearly all of Tuesday’s losses. Nine of the index’s 10 main groups were higher.
Sentiment was also boosted by a suite of strong corporate earnings reports in the United States, while the Fed’s Beige Book provided further evidence that additional monetary easing was coming soon.
“Generally the mood in the markets is fairly upbeat right now,” said David Baskin, portfolio manager and president of Baskin Financial Services. “People have recognized that with interest rates very low, there’s no return to be had in the bond market. So they’re being driven into the stock market.”
Shares of space technology company MacDonald Dettwiler MDA.TO jumped nearly 10 percent on speculation the company was for sale, but pared gains after the company issued a partial denial. The stock finished 3.9 percent higher at C$47.91. [ID:nN20237898]
WestJet Airlines (WJA.TO) leaped more than 5 percent after Canada’s No. 2 airline struck its first alliance with a U.S. carrier, American Airlines, a deal that should boost its passenger numbers. WestJet pared gains to close up 2.9 percent at C$12.20. [ID:nN20203910]
On the downside, Encana (ECA.TO) dropped 3.42 percent to C$29.13 after the country’s largest natural gas producer reported third-quarter profit below market expectations, cut its 2010 production outlook and lowered its forecast for cash flow per share. [ID:nSGE69J0FK]
Potash Corp POT.TO was also a key decliner, down 1.68 percent at C$145.90, after the province of Saskatchewan said it opposed BHP Billiton’s (BLT.L) hostile $39 billion bid for the world’s largest fertilizer producer. [ID:nSGE69J05K] [ID:nN20230235]
($1=$1.02 Canadian) (Reporting by Ka Yan Ng; editing by Peter Galloway)