October 28, 2008 / 3:10 PM / 10 years ago

CANADA STOCKS-Resources lead rally as commodity prices rise

*Materials up on firmer metals prices

*Energy sector rises despite softening oil

*Manulife Financial climbs following slump

*Rogers climbs after strong quarterly results

(Adds quote, details, updates figures)

TORONTO, Oct 28 (Reuters) - The Toronto Stock Exchange’s main index rose on Tuesday morning but gave back earlier gains as commodity prices softened, spurring a recovery in resource shares after Monday’s steep drop.

The rise came after a sharp decline in the previous session, when the index logged its second biggest percentage drop ever and closed below 9,000 for first time in nearly four years, losing more than 300 points in the last half hour of trade.

Heavily weighted stocks that pushed the market higher on Tuesday included insurer Manulife Financial Corp (MFC.TO), which rose 1 percent, and oil company EnCana Corp (ECA.TO), which was up 1.2 percent.

Given Monday’s drop, investors are shopping for beaten-down stocks, said Peter Chandler, senior vice-president at Canaccord Capital in Waterloo, Ontario.

“We were way, way oversold by any way you measure,” Chandler said. “At points in time you get exhaustion on the sell side and you get people coming in bargain-hunting on the buy side, and that’s what you’re seeing today.”

Shortly before 11:00 a.m. (1430 GMT), the S&P/TSX composite index .GSPTSE was up 122 points, or 1.43 percent, at 8,659.34, with all of its 10 main groups higher. Earlier, it raced as much as 5.5 percent higher.

“The commodity markets are going counter-trend to currency markets so the U.S. dollar is weakening here and you’re seeing a lot of those deeply oversold commodity-based vehicles — energy, base metals, precious metals - giving a little bit of a reflex bounce,” added Chandler.

“Whether it is a sustainable bounce or nothing more than a couple of days is what we have to determine and it’s too early to determine that.”

As of Monday’s close, the benchmark index had slid 27 percent this month, with volatility at extreme levels.

The oil and gas sector gained 0.5 percent as the price of oil dropped to around $63 a barrel, rising earlier along with a rise in equity markets. [ID:nSP356619] EnCana rose 1.2 percent to C$51.66.

Materials rose 0.6 percent as metals prices firmed [ID:nLS113101]. Barrick Gold (ABX.TO) rose 4.4 percent to C$23.50.

The financials group rose 1.1 percent, even after brokerage Dundee Securities downgraded the country’s biggest banks, saying earnings estimates and valuations for the banks will remain under pressure and will decline even further in 2009. [ID:nBNG381855]

Manulife Financial rose 1.1 percent to C$21.40, while Royal Bank of Canada (RY.TO) climbed 1.3 percent to C$43.07.

Shares of Rogers Communications Inc (RCIb.TO), the country’s biggest wireless service provider, rose 2.4 percent C$29.76. Earlier it said quarterly profit jumped 84 percent, beating analyst expectations, helped by sales of Apple’s iPhone. [ID:N27347751]

Elsewhere, Borealis Infrastructure Management Inc says it will reduce its offer price for all the outstanding units of Teranet Income Fund TF_u.TO as market conditions have deteriorated and the cost of capital has risen. Teranet units sank 8.9 percent to C$9.58. ($1=$1.29 Canadian) (Reporting by Jennifer Kwan; Editing by Frank McGurty)

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