January 27, 2009 / 10:14 PM / 10 years ago

CANADA STOCKS-TSX closes higher in anticipation of budget

* Stronger financials overcome commodity groups

* Canada pledges to bolster financial system

* Resources fall with underlying commodity prices (Adds details)

By Ka Yan Ng

TORONTO, Jan 27 (Reuters) - Toronto’s main stock index finished more than 1 percent higher on Tuesday as optimism ahead of Canada’s budget boosted financial shares and overcame a drag from commodities groups.

Banks and insurers dominated the gainers. Royal Bank of Canada (RY.TO) was up 3.9 percent at C$30.66, while Manulife (MFC.TO) gained 6 percent to C$21.40.

The sector rose 3.88 percent, partly on hopes that the federal budget, released after market close, would contain measures to ensure stability in the financial system.

In the event, the government said it would seek to bolster the financial system and improve access to financing by committing C$50 billion more to a program that buys insured mortgages. It also will give itself the authority to inject capital into banks and financial firms that need support. [ID:nN27430329]

Looking ahead, analysts expect the budget to have a limited impact on stocks because the government had leaked an unprecedented amount of detail about the package in the days leading up to Tuesday’s release.

The plan is expected to meet with the approval of the opposition Liberals, which would ensure the survival of the minority Conservative government.

“The big issue is not so much the budget itself, it’s more is it good enough to allow the government to survive here,” said Levente Mady, a broker at MF Global Canada, in Vancouver.

The S&P/TSX composite index .GSPTSE closed up 1.2 percent, or 103.12 points, at 8,759.63. Eight of the index’s 10 main groups advanced.

The resource sectors, which account for about 40 percent of the index’s weighting, fell on weakness in underlying commodity prices. The price of oil fell 9 percent to under $42 a barrel, while gold held below $900 an ounce as investors took profits after the last session’s gains.

The energy group fell 0.75 percent and materials dropped 1.54 percent. (Reporting by Ka Yan Ng; Editing by Frank McGurty)

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