May 20, 2009 / 3:25 PM / 10 years ago

CANADA STOCKS-TSX touches 2009 high as commodities rally

* TSX index hits new 2009 high of 10,365.39

* Energy, materials lead rally (Adds details, quote)

By Jennifer Kwan

TORONTO, May 20 (Reuters) - Toronto’s main stock market rallied more than 2 percent on Wednesday morning to a new 2009 high as rising oil and gold prices lifted the resource-laden market.

The mining-heavy materials group, up 3.4 percent, led the rally as the price of gold hit an eight-week high amid a slide in the U.S. dollar, and as oil CLc1 rose above $60 a barrel to a six-month high. [ID:nLK309625]

Shares of gold miner Goldcorp (G.TO) rose 4.2 percent to C$41.33, while Barrick Gold (ABX.TO) climbed 3.9 percent to C$40.85. EnCana (ECA.TO) added 2.8 percent to C$63.32.

“For the time being, markets seem to be shrugging off what little bad news seems to be out there right now,” said Steve Ibel, institutional equities trader at Beacon Securities, in Halifax, Nova Scotia.

“Part of it is people don’t want to miss a commodities run because commodities (strength) often precedes a market recovery.”

Markets largely ignored data that showed Japan’s economy shrank at a record pace in the first quarter. [ID:nSP468900]

At 10:54 a.m. (1454 GMT), the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE was up 239.03 points, or 2.37 percent, at 10,339.98, with eight of its main groups in the black. Earlier it hit a 2009 high of 10,365.39.

The rally adds to the 3.5 percent gain logged on Tuesday, as the Toronto index caught up with a rise by U.S. stocks on Monday, when the TSX was closed.

Investors were also reassured by signs that credit is thawing and that volatility is subsiding, Ibel said. However, he said the market likely still has more room to fall.

The heavily weighted financials sector, up 1.7 percent, helped underpin the rally after Bank of America Corp (BAC.N) said it had raised $13.47 billion to meet government requirements for capital-raising following the results of a stress test on U.S. banks. [nN19416813]

Manulife Financial (MFC.TO) climbed 3 percent to C$22.87, while Royal Bank of Canada (RY.TO) rose 1.1 percent to C$43.93.

Toronto stocks rose in tandem with the Canadian dollar, which shot to a seven-month high on Wednesday, lifted by rising oil prices and equities, as well as inflation data that was seen as making it less likely that the Bank of Canada will resort to unconventional measures, or quantitative easing, to stimulate the economy. [ID:nN20319266]

$1=$1.14 Canadian Reporting by Jennifer Kwan; editing by Peter Galloway

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