* Royal Bank of Canada warns of trading losses
* Financials reverse early steep losses, most banks up
* Energy group advances as oil rises more than 8 pct
* Citigroup bailout helps lift sentiment broadly
By Ka Yan Ng
TORONTO, Nov 24 (Reuters) - The Toronto Stock Exchange’s main index shot 4 percent higher in volatile dealings on Monday as resource shares rose on higher commodity prices and the financial group gained on the U.S. government’s rescue of banking giant Citigroup. (C.N)
The financial group advanced 3.34 percent, reversing a loss earlier in the day brought on by an earnings warning from the country’s biggest bank, Royal Bank of Canada (RY.TO).
Royal said its fourth-quarter profit, due next week, would drop by 15 percent from the year-before quarter, partly because of held-for-trading securities losses. It also said it would book a provision for credit losses of about C$620 million. [ID:nN24501121]
That prompted an early drop in Royal shares that was later offset by positive reaction to Washington’s Citigroup move, with concerns about weaker Canadian bank earnings being outweighed by relief that the global financial system might have avoided collapse with the Citigroup rescue.
The U.S. government agreed to shoulder most potential losses of Citigroup’s toxic assets and inject new capital, its biggest effort yet to prevent a big bank from failing. [ID:nN24499982]
Royal Bank, the third Canadian bank to provide a warning in the past week, gained 4.5 percent to C$38.10, with most other bank stocks advancing. National Bank of Canada posted the biggest percentage gain among its peers, up 8.8 percent at C$37.85.
The news about Citigroup, which is one of the banks financing BCE’s (BCE.TO) C$34.8 billion buyout, also helped lift BCE stock. [ID:nN24516514]
BCE had languished as investors fretted the deal could be repriced, delayed or abandoned altogether because of problems in the financial markets. The stock climbed nearly 10 percent to C$37.83.
Shortly after 11:50 a.m. (1650 GMT), the S&P/TSX composite index .GSPTSE was up 4 percent, or 329.91 points, at 8,485.30. Seven of the index’s 10 main sectors advanced.
But the ability of the index to hang on to its gains is questionable given recent market patterns, said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
“I don’t have the confidence that any uptick in the market is sustainable until the financial problems are cured, meaning that the banks are stabilized in the U.S.,” he said.
“I feel that a lot of the longer-term money, for lack of a better word, is still on the sidelines.”
The big energy group forged ahead 7 percent, supported by the gain in the price of oil. Crude rose more than 8 percent as investors considered the prospect of a further OPEC supply cut and as stock markets rallied following the Citigroup news. [ID:nN24422129]
Canadian Natural Resources (CNQ.TO) gained 7.6 percent to C$44.77, while Petro-Canada PCA.TO rose 13.2 percent to C$25.46.
The materials group gained 4.4 percent as gold prices jumped with market players looking for quality investments. [ID:nLO193071] Goldcorp (G.TO) gained 9 percent to C$33.83.
But shares of NovaGold (NG.TO) plunged more than 70 percent to 51 Canadian cents after the Canadian miner said it had suspended operations at its only producing mine, and warned it would need additional funding to meet financial obligations due in December. [ID:nN24516036]
$1=$1.23 Canadian Reporting by Ka Yan Ng; Editing by Peter Galloway