11/11/2011 08:29 EST | Updated 01/11/2012 05:12 EST

TSX to head higher, commodities rise as market fears over Italy, Greece ease

TORONTO - The Toronto stock market surged Friday while commodity prices jumped as traders felt more comfortable taking on risk amid signs that Italy and Greece are making progress on getting a grip on their serious debt problems.

The S&P/TSX composite index jumped 167.97 points to 12,276.85 with all sectors positive while the TSX Venture Exchange climbed 16.75 points to 1,641.31.

The Canadian dollar was up 0.5 of a cent to 98.76 cents US on foreign currency desks. Canadian banks and the domestic bond market were closed for the Remembrance Day holiday while the U.S. bond market was shuttered for Veterans Day.

U.S. markets also surged as the Dow industrials ahead 259.89 points to 12,153.68. The Nasdaq was up 53.6 points to 2,678.75 and the S&P 500 index was ahead 24.16 points to 1,263.85.

The market also was powered by strong consumer sentiment data from the U.S.

The University of Michigan’s consumer sentiment index for this month rose to 64.2, compared to a final October reading of 60.9.

Markets were reassured as Italy took concrete steps to deal with reining in its huge debt.

The Italian senate voted Friday to pass a budget bill containing economic reforms demanded by the European Union.

Italy's lower Chamber of Deputies could take up the legislation as early as Saturday, paving the way for the resignation of premier Silvio Berlusconi, who was seen as an obstacle to meaningful economic reforms. He is expected to be replaced by respected economist Mario Monti.

And in Athens, premier Lucas Papademos swore in a new cabinet Friday, a day after being appointed to head an interim coalition government that will push through a new European debt deal and secure continued bailout funding to prevent a catastrophic default.

Despite Friday's strong showing, the TSX fell one per cent this past week.

Italy became the flashpoint for European government debt crisis worries at the beginning of the week and markets demanded much higher amounts to buy the country's bonds amid a lack of confidence that the country can deal with its huge debts of €1.9 trillion, which is too big for Europe’s current bailout facility to handle.

However, expectations that Monti will lead a post-Berlusconi government have helped calm those jitters, and Italy’s 10-year bond yield was now down below the seven per cent threshold that eventually forced Greece, Ireland and Portugal to seek bailouts. It fell another 0.17 percentage point Friday at 6.62 per cent.

Still, conditions remain volatile and will likely remain so until markets are convinced that the eurozone can come up with a plan to once and for all deal with the debt crisis.

Many analysts say the only answer is the European Central Bank to become a lender of last resort, an idea that the ECB has dismissed in the past.

"The best would be if the central bank stepped in and said, look, we’re there come hell or high water," said James Muir, director at Fraser Mackenzie.

And in the meantime, the market will continue to be pulled in different conditions, depending on the latest news from the eurozone.

"Investors are just betwixt and between all the time because they don’t want to get left behind either way and so they just rush for the entrance or rush for the exits all at the same time depending on the hint of news," said Muir, who added that markets could take off if the European debt issue could get resolved.

Crude oil prices headed closer to the US$100 mark and closed at a three-month high. The December contract on the New York Mercantile Exchange up $1.21 to US$98.99 a barrel, its highest close since the end of July. The energy sector rose 1.33 per cent as Suncor Energy (TSX:SU) gained 75 cents to $32.36 and Imperial Oil (TSX:IMO) rose 63 cents to $42.40.

Crude has soared about 30 per cent from US$75 on Oct. 4, on optimism Europe will be able to at least temporarily keep its debt problems from sparking a global financial crisis, though jitters re-emerged over the last two weeks.

Falling crude inventories in the U.S. and Europe have also helped boost prices.

The base metals sector rose 2.35 per cent while metal prices also advanced as December copper on the Nymex edged up nine cents to US$3.46 a pound. Teck Resources (TSX:TCK.B) climbed 56 cents to $38.31 and First Quantum Minerals (TSX:FM) advanced 77 cents to $18.97.

The gold sector was ahead almost three per cent as bullion also rose while the December contract gained $28.50 to US$1,788.10 an ounce. Barrick Gold Corp. (TSX:ABX) improved by $1.70 to $53.27 and Goldcorp Inc. (TSX:G) ran up $2.28 to $54.58.

The financials sector also provided lift, up 0.86 per cent with Scotiabank (TSX:BNS) ahead 38 cents to $51.37 and Royal Bank (TSX:RY) climbed 65 cents to $45.65.

Power Financial Corp. (TSX:PWF) shares gained 61 cents to $26.11 as it reported net earnings attributable to shareholders were $312 million, or 44 cents a diluted share in the third quarter. That compared with net profits of $294 million or 41 cents a share last year. Revenues dropped to $9.1 billion from $9.7 billion.

Shares in TransCanada Corp.’s (TSX:TRP) were ahead 96 cents to $40.81 after the U.S. State Department said Thursday it wants the company to explore other routes for the controversial Keystone XL pipeline so it skirts ecologically sensitive areas of Nebraska. That will delay the US$7-billion project by years, and could kill it outright if TransCanada customers lose patience and find other alternatives. TransCanada shares have lost 6.7 per cent in the last two weeks.

In earnings news, diversified investment firm Brookfield Asset Management Inc. (TSX:BAM.A) reported third-quarter net income of US$716 million, or 36 cents per share, from $342 million, or 16 cents per share a year earlier. Revenue increased to $4.58 billion from $3.55 billion. It shares gained 52 cents to $29.14.