TORONTO (Bloomberg) — Canada main stock index posted its biggest three-day gain in 23 years, led by financial, commodity and telephone companies, after the US economy shrank less than expected and central banks cut borrowing costs.

Royal Bank of Canada joined a global equity rally after Asian reserve banks reduced interest rates and the Federal Reserve provided $120 billion to emerging economies. Talisman Energy Inc. paced the advance in resource producers even as commodity prices fell. Rogers Communications Inc. led phone shares higher.

The Standard & Poor's/TSX Composite Index rose 3.7 percent or 364. 65 points to 9,856.21 in Toronto, for a three-day gain of 15 percent, the most since March 1975. It was the longest win streak in seven weeks for the S&P/TSX, which still is down 16 percent in October, its worst monthly drop since 1998, on concern the credit crisis will deepen a US recession and hurt demand for commodities.

"The short-term interest rate scenarios are improving," said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. "We had some pretty strong gains overnight in the rest of the world. We've probably established the lows for the next two to four months.

"Technically we're due a rally, though on a fundamental basis there will be another test in the future. The economy is falling off a cliff."

The US, Canada's biggest trading partner, contracted less than forecast in the third quarter, shrinking at a 0.3 percent annual pace. Economists in a Bloomberg poll had forecast a 0.5 percent contraction. It's still the biggest decline since 2001.

Royal Bank, the country's biggest lender, added 4.7 percent to C$47.58. Bank of Nova Scotia, the third-largest, gained 4.7 percent to C$40.80. Rival Toronto-Dominion Bank climbed 3.6 percent to C$56.43.