TORONTO - The Toronto stock market closed slightly higher Thursday, led by gains in mining stocks after China's main index bounced back from a sharp selloff.

The S&P/TSX composite index rose 13.68 points to 10,700.51 as the main Shanghai index ran up 4.5 per cent, reversing four per cent retreat Wednesday that made investors feel somewhat better about the prospect of an economic recovery.

Before advance Thursday, the Shanghai index was down more than 20 per cent from its early August peak, officially putting it into bear market territory.

"You can make the argument that we should be looking at Shanghai because it is the leading indicator for commodity prices, which is obviously very important for Canada," said Gavin Graham, director of investments at BMO Asset Management.

The showing in Toronto comes during a volatile week with huge intraday swings as investors worry about the strength of an economic recovery and how much of a role the debt-laden U.S. consumer and Asian economies can play.

"The U.S. consumer is both cash strapped and they're very sensibly saving money," observed Graham.

The energy sector was off 0.2 per cent as natural gas prices fell to their lowest level in more than seven years after the latest U.S. government figures showed a big increase in supplies. The September contract for natural gas dropped 17.4 cents to US$2.945 per thousand cubic feet of the fuel.

Crude oil prices moved slightly higher higher after data showing a big drawdown in U.S inventories last week sent oil up more than US$3 a barrel. The September crude contract on the New York Mercantile Exchange was up 12 cents to US$72.54.

The base metals sector was the leading advancer, up one per cent as September copper shed 1.9 cent to US$2.7415 a pound. Teck Resources (TSX:TCK.B) advanced 73 cents to $28.39.

Mining giant Rio Tinto said sharp falls in metals and mineral prices were behind first-half profit dropping by nearly two thirds to US$2.5 billion. Its shares slipped 17 cents to US$58.03 in New York.

The Canadian dollar was ahead 0.7 of a cent at 91.97 cents U.S. as wholesale sales rose for the first time in nine months in June. Statistics Canada reports sales in current dollars rose 0.6 per cent to $40.4 billion.

The TSX Venture Exchange climbed 7.44 points to 1,184.39.

U.S. indexes were ahead thanks to U.S. economic data and the strong rebound by Chinese shares. The Dow Jones industrials moved 70.89 points higher to 9,350.05.

The Nasdaq composite index advanced 19.98 points to 1,989.22 while the S&P 500 points edged up 10.91 points to 1,007.37 after the number of newly laid-off U.S. workers filing claims for unemployment benefits rose unexpectedly for the second straight week.

The U.S. Labour Department says the number of first-time jobless claims rose to a seasonally adjusted 576,000 last week, from a revised figure of 561,000. Wall Street economists expected a drop to 550,000, according to a survey by Thomson Reuters.

Banks and insurance companies also supported New York markets after the new CEO of American International Group Inc. was quoted by Bloomberg News as saying the company will repay its debts to the government.

When the credit crisis hit last year, the U.S. government rescued AIG from the brink of collapse with a loan bailout package worth up to $182.5 billion. AIG shares jumped $5.66 or 21.25 per cent to US$32.30.

Shares of retailer Sears Holdings Corp. fell as the company that owns Sears and Kmart stores lost US$94 million while revenue fell 10 per cent to US$10.55 billion. The stock lost $8.76 or 12 per cent to close at US$65.

In Canada, the industrials sector was a leading decliner, down 0.77 per cent. Shares Bombardier Inc. (TSX:BBD.B) were down 16 cents to $3.98 after it said its aerospace division has terminated an order for Lear jets from Jet Republic that was worth up to US$1.5 billion.

The December bullion contract moved down $3.10 to US$941.70 an ounce and the gold sector was flat.

In other corporate news, Enerplus Resources Fund (TSX:ERF.UN) units declined 84 cents to $21.75 as it grabbed a toe-hold in the northeastern United States' promising Marcellus shale gas play.

It is paying US$406 million to Chief Oil & Gas LLC and its affiliates Chief Exploration & Development LLC and a limited partnership managed by Tug Hill Inc., to acquire part of their interests in the Marcellus play.

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