Rising mining stocks helped take the S&P/TSX composite index up 95.51 points to 11,497.3. The TSX Venture Exchange shed 7.01 points to 1,269.7.
The Canadian dollar was up 0.43 of a cent at 97.4 cents US.
Traders were encouraged by comments from a Federal Reserve official that he supported more measures to stimulate the economy.
Charles Evans, president of the Fed’s Chicago bank, told Bloomberg News that he supported action to produce faster job growth. Last week, Fed Chairman Ben Bernanke said he was ready to act if the economy needs, but made no promises.
The Dow Jones industrial average rose 162.57 points to 12,573.8, the Nasdaq composite index was 33.34 points higher at 2,843.07 and the S&P 500 index gained 15.25 points to 1,324.18.
Ratings agency Fitch said it was downgrading 18 Spanish banks as a result of a previous downgrade of the Spanish sovereign debt on June 7. Fitch said it had conducted stress tests, both on the Spanish banking sector as a whole and on individual banks, updating results from tests done in 2011.
Eurozone finance ministers said Saturday they would make €100 billion available to Spain to revive banks crushed by bad real estate loans. But early relief about the deal turned to doubt as traders worry the money will just add to the Spanish government’s already considerable debts and perhaps force it to seek its own sovereign bailout.
That investor wariness was evident on bond markets where the yield on Spain's 10-year benchmark bond shot up 0.28 of a point to 6.81 per cent, a record high and dangerously close to the seven per cent yield that has forced other countries to seek rescue loans. The bond rate fell back to 6.67 per cent in late trading.
Italy’s yields rose to just over six per cent amid market frustration that European authorities seem unable to get ahead of the debt crisis.
"What we’ve had over the last year and a half is reactionary policies out of Europe," said John Tsagarelis, senior portfolio manager at Manulife Asset Management.
"They have to become more proactive."
There was also nervousness ahead of Sunday’s election in Greece. The worry is that a left-wing party that advocates tearing up the country’s bailout agreement will be the big winner. If that happens, Greece could end up leaving the eurozone with unpredictable consequences for other debt-laden eurozone countries such as Italy.
The TSX was also supported by a major deal for transportation giant Bombardier Inc. (TSX:BBD.B), which could reap up to $9.6 billion from the sale of business jets and related services.
One of Warren Buffett’s companies, NetJets Inc., has signed a deal to buy up to 275 Bombardier Challenger business jets that could be worth up to US$7.3 billion. Bombardier said it has also signed a 15-year service and maintenance agreement for the aircraft, worth as much as an additional US$2.3 billion if all options are exercised. Its shares jumped 22 cents or 6.03 per cent to $3.87 on heavy volume of 21.2 million shares.
The gold sector was up about 0.9 per cent as August gold gained $17 to close at US$1,613.80 an ounce. Goldcorp Inc. (TSX:G) ran ahead 51 cents to C$40.46 and Kinross Gold Corp. (TSX:K) rose nine cents to $8.57.
The base metals sector was up 0.9 per cent as July copper edged a cent lower to US$3.34 a pound. Ivanhoe Mines (TSX:IVN) climbed 34 cents to C$10.62 and Teck Resources (TSX:TCK.B) improved 56 cents to $31.81.
Oil prices were higher after three days of declines as traders also closely watched a quarterly meeting of the Organization of Petroleum Exporting Countries on Thursday.
Some members of the cartel have suggested recently that OPEC is producing too much crude and the group could decide to cut supplies to help boost prices. The July crude contract on the New York Mercantile Exchange gained 62 cents to US$83.32 a barrel and the energy sector rose 0.36 per cent. Talisman Energy (TSX:TLM) ran ahead 42 cents to C$11.23 and Suncor Energy (TSX:SU) rose 64 cents to $28.97.
Bargain hunters have been attracted to the TSX over the last week in the wake of a string of sharp slides in May as the eurozone debt crisis worsened and worries grew about the pace of the global economic recovery. The TSX is still down almost 10 per cent from its 2012 highs in late February.
In other corporate news, Canadian agribusiness Viterra (TSX:VT), which is on the verge of being acquired by Swiss commodities giant Glencore, says its profit rose to $67 million in the second quarter. That is more than double what it had the same time last year. Earnings came in at 18 cents a share, beating analyst forecasts by six cents. Viterra shareholders have overwhelmingly approved the $6.1-billion takeover offer but the deal still requires certain approvals in Canada and abroad. Viterra shares added a penny to $16.12.