September 30, 2008 / 4:03 PM / 10 years ago

UPDATE 2-Toronto stocks rally as U.S. bailout hopes revive

*TSX rallies after near 7 percent drop on Monday

*Energy sector climbs 5 percent as oil bounces back

*Hopes for U.S. bailout plan boost financial services

(Adds details, analyst’s comments, updates figures)

TORONTO, Sept 30 (Reuters) - The Toronto Stock Exchange’s main index rallied on Tuesday morning as oil and gas stocks got a boost from crude’s recovery and market hopes for a deal on the $700-billion Wall Street bailout plan revived.

The index tumbled nearly 7 percent on Monday, the biggest drop in eight years, as U.S. lawmakers rejected the rescue plan.

Shortly before 11:30 a.m., the energy group, which dropped 10.6 percent in the previous session, was leading the way, up 5.2 percent as oil bounced back toward $99 a barrel. [ID:nSP246010]

In the oil patch, EnCana Corp (ECA.TO) jumped 4.8 percent to C$68.13, while Canadian Natural Resources (CNQ.TO) was up 8.6 percent at C$70.90.

“The main thing pushing it this morning is there is the belief that they are going to renegotiate and tweak the bailout package over the next one or two days,” said Steve Ibel, institutional equities trader at Beacon Securities in Halifax, Nova Scotia.

The benchmark index was also getting a boost from “value pickers,” he added.

The S&P/TSX composite index .GSPTSE was up 428.05 points, or 3.79 percent, at 11,713.12, with all of its 10 main groups were higher.

Materials were up 3 percent with Potash Corp of Saskatchewan Inc POT.TO rising 7.2 percent at C$145.05, while Teck Cominco Ltd TCKb.TO rose 10.8 percent to C$32.03.

Fording Canadian Coal Trust FDG_u.TO unitholders voted in favor of a $14 billion takeover by Teck Cominco, which will make Teck one of the world’s top exporters of coal used in steel-making. Fording units climbed 10.5 percent to C$87.45.

The gold miners subgroup, however, slipped along with the price of bullion. [ID:nLU150945] Barrick Gold Corp (ABX.TO) was down 3 percent at C$39.18.

The financial services sector rose 3.4 percent with Manulife Financial (MFC.TO) up 1.1 percent at C$36.65, while Royal Bank of Canada (RY.TO), Canada’s biggest bank, rose 4.2 percent to C$49.49.

In economic news, Canadian gross domestic product rose steeply in July, while industrial product prices and raw materials prices fell in August. [ID:N30427649]

Analysts cut the Forzani Group Ltd’s FGL.TO stock price target and lowered its earnings-per-share estimates after disappointing same-store sales from Canada’s biggest sporting goods retailer amid a slowing retail outlook. [ID:N30431694] The stock rose 4.7 percent to C$10.73, however.

$1=$1.06 Canadian Reporting by Jennifer Kwan; Editing by Peter Galloway

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