TORONTO (Reuters) - The Toronto Stock Exchange's benchmark index ended higher for a third straight day yesterday, the first three-day winning streak in more than five weeks, as investors' nerves were calmed by the lack of any surprises related to the subprime mortgage saga.

The S&P/TSX composite index closed 128.37 points, or one percent, higher at 13,238.71.

In the past three sessions, the benchmark index has climbed three percent after tumbling 6.6 percent in the previous six. It is currently at early-April levels.

"I think basically, it's a rebound from the oversold situation we saw last week, as everyone worried that the liquidity problems in US and Canadian financial markets would lead to much slower growth and that global growth slowing down suggested lower commodity prices," said Kate Warne, Canadian market strategist at Edward Jones in St. Louis, Missouri.

"Now we're beginning to see the unwinding of many of those fears."

Financial issues, which represent almost a third of the total index, led the gains, up 1.4 percent. Canada's big six banks are set to begin reporting earnings this week, starting with Toronto-Dominion Bank tomorrow and Royal Bank of Canada on Friday. The other four of the big six are due to report their earnings next week.

Even though the banks are forecast to report earnings growth of between 11 and 15 percent, the focus will be on any exposure they may have to troubled assets such as subprime mortgages.

TD Bank climbed C$1.13, or 1.7 percent, to C$68.43, while Royal Bank added 92 Canadian cents, or 1.7 percent, to C$54.32.

The resource-heavy materials sector was up 2.1 percent.

"The materials sector has been one of the more beaten down sectors and I think this week it's rebounded partly because the hope is that the (US Federal Reserve) will come in and cut rates, supporting both US growth and global growth," said Fergal Smith, managing market strategist at Action Economics.

Federal Reserve Chairman Ben Bernanke told Sen. Chris Dodd, chairman of the US Senate banking committee, that the Fed would use "all available tools" to calm financial markets, fueling speculation of an cut in their funds rate.

Telecoms also added buoyancy to the market, up 3.4 percent, with Telus Corp. jumping C$2.6, or 5.1 percent, to C$54.36 after hitting a 52 week low on Monday.

The energy group, down 1.9 percent, was hurt by tumbling oil prices, as Hurricane Dean weakened and forecasts showed the storm would not hit US oil production and refinery facilities in the Gulf of Mexico. US crude oil futures slipped more than two percent, dropping below $70 a barrel for the first time since July 2.