* TSX up 126.66 pts, or 1 pct, at 12,241.76
* Materials, energy sectors lead gains
* U.S. economic data boosts commodities
* Greece, euro zone fears still weigh
By Jon Cook
TORONTO, Nov 2 (Reuters) - Toronto’s main stock index rallied on Wednesday after two days of sharp declines, finishing up 1 percent as U.S. economic data and stronger commodity prices helped offset fears about the looming Greek referendum on the euro zone’s bailout package.
Copper, oil, gold and base metals prices responded positively to a U.S. Federal Reserve statement that offered a moderately brighter economic outlook and appeared to leave open the door for further easing.
The market’s positive performance was held in check, however, by lingering fears that a Greek confidence vote would result in the rejection of a 130 billion euro bailout package, which would have significant repercussions for the global economy.
“The risk of a disorderly Greek default has the capacity of putting major economies back in recession,” said Fergal Smith, managing market strategist at Action Economics.
“U.S. data has been coming in better over the last while; there’s a bullish thread supporting the market on the back of that,” he added.
A report showing U.S. private-sector payrolls rose in October, helped support analysts’ views that the world’s No. 1 economy is maintaining its slow growth and is not sliding back into recession.
“I think the market is starting to form a viewpoint that maybe by things getting worse, perhaps that’s the price we need to pay for things getting better in the intermediate term,” said Paul Taylor, chief investment officer at BMO Harris Private Banking.
The Toronto Stock Exchange’s S&P/TSX composite index gave back some of its early gains, finishing up 126.66 points, or 1 percent, at 12,241.76, after rising as high as 12,325.77.
The upswing came on the heels of a two-day decline in which the TSX touched a two-week low of 11,913.73.
Energy issues and the heavily weighted materials sector played the biggest roles in lifting the TSX, with the base metals subgroup up more than 3 percent.
“This sector is exceptionally sensitive to the economic climate,” noted Smith. “It had to contend with a major shock yesterday, but the overall thread of data has been improved.”
Materials were led higher by Barrick Gold , which climbed for a second straight day, rising 1.8 percent to C$51.18. Potash Corp was up 2 percent to C$47.45.
The energy sector rallied after a 3 percent fall the previous day, gaining 1.7 percent.
Suncor Energy , was up 2.8 percent to C$31.79, while Canadian Natural Resources , gained 2.7 percent to C$34.98, were the biggest gainers.
Rick Hutcheon, president and chief operating officer at RKH Investments, said the market appeared to be getting close to setting a bottom.
“We’re probably getting down to the levels where we’re reasonably oversold and selective value in the Canadian marketplace is starting to creep in,” Hutcheon said.
In individual company news, shares of Industrial Alliance Insurance and Financial Services plunged nearly 11 percent after it reported a 28 percent drop in earnings on the back of weak markets and claims-related losses.