The S&P/TSX composite index jumped 125.69 points to close at 11,633.4 on top of a 172-point surge Tuesday. The index had been up as much as 179 points Wednesday morning but gains eroded as the gold sector turned sharply lower, even as bullion closed at a one-month high. The TSX Venture Exchange was up 17.07 points to 1,302.64.
Buyers moved in following a drop of almost two per cent last week that left the market down about 10 per cent from the highs of 2012 in late February.
"It’s a relief rally," said John Stephenson, portfolio manager at First Asset Funds.
"Many people have been sitting on the sidelines, waiting for an opportunity to get in. And hope springs eternal."
The Canadian dollar was up 0.95 of a cent to 97.29 cents US as traders waded into riskier assets such as equities, commodities and resource-based currencies.
Gains were also supported by the U.S. Federal Reserve’s latest regional survey on the economy.
The Fed’s so-called Beige Book found that the U.S. economy grew moderately in most regions of the country this spring and companies kept hiring. This was a hopeful sign after a spate of gloomy data released last week, including a huge miss in expectations for job creation during May.
New York's Dow Jones industrials surged 286.84 points to 12,414.79.
The Nasdaq composite index gained 66.61 points to 2,844.72 and the S&P 500 index was ahead 29.63 points to 1,315.13.
The rise also reflected rumours that Germany and European Union officials were moving quickly to find a way to rescue Spain’s hobbled banks.
Markets have been whipsawed over the last month by growing worries about the eurozone debt crisis, including the possibility that Greece could be forced to leave the monetary union. But concerns have greatly increased in recent days about the health of Spanish banks, which are loaded with billions of toxic loans as a result of the collapse of the country's housing sector.
Spain needs money to rescue its ailing banks, but can currently only receive such aid from the EU in a government bailout package. Madrid adamantly wants to avoid such a solution, as it would mean fellow eurozone countries and the International Monetary Fund would be allowed to impose fiscal policies on the country.
The country has been forced to pay higher interest rates on its debt, coming close last week to the seven per cent level that is widely viewed as unsustainable.
The yield on Spain’s key 10-year bond edged down to 6.24 per cent Wednesday morning on hopes the European Union may be moving closer toward adopting measures that could alleviate the country’s financial crisis.
The TSX energy sector advanced 2.64 per cent as commodity prices moved higher with the July crude contract on the New York Mercantile Exchange up 73 cents to US$85.02 a barrel. Prices have been buffeted over the past few weeks as the worsening eurozone crisis has stalled an already fragile global economic recovery with commodities hitting multi-month lows. Suncor Energy (TSX:SU) gained 94 cents to $29.24 and Cenovus Energy (TSX:CVE) ran up $1.59 to $32.47.
Prices for copper, viewed as an economic bellwether as it is used in so many applications, jumped nine cents to US$3.38 a pound and the base metals sector gained 3.4 per cent. Teck Resources (TSX:TCK.B) rose 90 cents to $32.31 while Ivanhoe Mines (TSX:IVN) gained 42 cents to $10.56.
Financials were also supportive, up 1.16 per cent as Bank of Montreal (TSX:BMO) moved ahead 62 cents to $54.98 while Sun Life Financial (TSX:SU) was 84 cents higher to $21.35.
Laurentian Bank's B2B Trust (TSX:LB) will pay about $415.5 million in cash to acquire the trust operation of AGF Management Ltd. (TSX:AGF.B). AGF's shares gained 52 cents to $12.24.
Laurentian Bank (TSX:LB) also said that it will boost its quarterly dividend by two cents to 47 cents per common share. Laurentian shares gained $1.11 to $42.35.
The gold sector drifted into negative territory, down about one per cent while bullion prices also improved with the August contract ahead $17.30 to US$1,634.20 an ounce, its highest close in a month. Goldcorp Inc. (TSX:IMG) faded 48 cents to $41.30.
Traders also took in a major shakeup of the senior management at Canada’s biggest gold company, which has been disappointed by its stock performance.
Barrick Gold Corp. (TSX:ABX) says Aaron Regent has been replaced as president and chief executive officer by Jamie Sokalsky, who was the Toronto-based company’s chief financial officer. Barrick stock declined $2.17 at $41.53, down sharply from its 52-week high of $55.36.
The European Central Bank said earlier in the day that it was keeping its key rate unchanged at one per cent.
There had been hopes ECB President Mario Draghi would also indicate the bank is prepared to cut the rate next month to stimulate a weakening eurozone economy and at the same time approve more stimulus measures in an effort to spur governments to take action themselves.
But Draghi has said the central bank cannot make up for inaction by governments.
Analysts say the bank is now likely to see what European leaders can come up with at a summit at the end of this month.
"But the problems that have plagued the eurozone are unlikely to get resolved any time soon because at the heart one is poor design and the euro itself is flawed because there is no fiscal part of it," added Stephenson.