The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> rose 85.15 points, or 0.55 percent, to 15,433.61. On Wednesday, it touched a three-month low intraday at 15,241.55.

"It's a rebound rally from the concerns that I think a lot of people had that the capital gains tax was going to get increased and taxes on dividends were going to get increased," said Rick Hutcheon, president and chief operating officer at RKH Investments.

Canada's Liberal government unveiled a stay-the-course budget after the stock market closed on Wednesday.

Businesses had feared higher capital gains taxes would harm their competitiveness just as U.S. rivals benefit from a break in taxes and regulation under U.S. President Donald Trump.

The U.S. House of Representatives canceled Thursday's vote on a healthcare bill. Losing the vote would bruise investors' confidence in Trump's ability to deliver on his promises of tax cuts and infrastructure spending.

The financials group, which contains many dividend-paying stocks, rose 1 percent as a recent decline in bond yields lost some momentum. Higher bond yields would reduce the value of insurance companies' liabilities and increase net interest margins of banks.

The energy group rose 0.4 percent even as oil prices struggled to recover from four-month lows because of investor concerns that OPEC-led supply cuts were not yet reducing record U.S. crude inventories.

U.S. crude prices settled 34 cents lower at $47.70 a barrel.

The U.S. State Department will approve on Friday the permit needed to proceed with construction of TransCanada Corp's (>> TransCanada Corporation) Keystone XL oil pipeline, according to two government sources familiar with the process. TransCanada's shares rose 0.4 percent to C$61.76.

Enbridge Inc (>> Enbridge Inc) fell 1 percent to C$54.54. On Wednesday, the company said it would cut about 1,000 positions after buying Spectra Energy Corp (>> Spectra Energy Corp.) of Houston.

Nine of the index's 10 main groups rose, with industrials gaining 1 percent as railroad stocks climbed, and consumer staples advancing 0.6 percent.

The materials group, which includes precious and base metals miners and fertilizer companies, dipped 0.3 percent.

Silver Wheaton Corp (>> Silver Wheaton Corp.) fell 3.7 percent to C$27.51, while Barrick Gold Corp (>> Barrick Gold Corp) was down 0.5 percent at C$25.84.

Gold futures fell 0.2 percent to $1,246.3 an ounce. [GOL/]

(Reporting by Fergal Smith; Editing by James Dalgleish and Peter Cooney)

By Fergal Smith