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Canadian dollars are pictured in Vancouver, B.C. Thursday, Sept. 22, 2011. (JONATHAN HAYWARD/THE CANADIAN PRESS)
Canadian dollars are pictured in Vancouver, B.C. Thursday, Sept. 22, 2011. (JONATHAN HAYWARD/THE CANADIAN PRESS)

At noon: Stocks holding onto gains Add to ...

The Toronto stock market was sharply higher Friday amid rising commodities as more political stability in Italy and Greece calmed investors at the end of a volatile week.

The S&P/TSX composite index jumped 204.28 points to 12,313.15 with all sectors positive while the TSX Venture Exchange climbed 17.13 points to 1,641.69.

The Canadian dollar was up 0.48 of a cent to 98.74 cents US. 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 Jones industrial average gained 269.58 points to 12,163.37. The Nasdaq composite index was up 49.27 points to 2,674.42 and the S&P 500 index was ahead 25.15 points to 1,264.84.

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

The lower Chamber of Deputies could take up the legislation as early as Saturday, which paves 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 headed for a negative week after Italy became the flashpoint for European government debt crisis worries 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 C1.9 trillion, which is too big for Europe's current bailout facility to handle.

However, expectations that Monti will lead a post-Berlusconi government has 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.

Oil prices headed higher for a second day, with the December contract on the New York Mercantile Exchange up $1.22 to US$99 a barrel after going as high as US$98.78, its highest level since July 27. The energy sector rose 1.8 per cent as Suncor Energy (TSX:SU) gained 76 cents to $32.37 and Imperial Oil (TSX:IMO) rose 70 cents to $42.47.

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 3.9 per cent while metal prices also advanced as December copper on the Nymex edged up seven cents to US$3.44 a pound. Teck Resources (TSX:TCK.B) climbed $1.33 to $39.08 and First Quantum Minerals (TSX:FM) advanced $1.24 to $19.44.

The gold sector was ahead 2.6 per cent as bullion also rose while the December contract gained $16.50 to US$1,776.10 an ounce. Barrick Gold Corp. (TSX:ABX) improved by $1.46 to $53.48 and Goldcorp Inc. (TSX:G) ran up $1.76 to $54.06.

The financials sector also provided lift, up 1.33 per cent with Scotiabank (TSX:BNS) ahead 71 cents to $51.70 and Royal Bank (TSX:RY) climbed 73 cents to $45.73.

Shares in TransCanada Corp.’s (TSX:TRP) were ahead 50 cents to $40.35 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 had lost almost nine per cent in the last two weeks.

European markets were also positive with London's FTSE 100 index ahead 1.79 per cent, Frankfurt's DAX was up 3.27 per cent and the Paris CAC 40 gained 2.81 per cent.

Earlier in Asia, Japan's Nikkei 225 index closed up 0.2 per cent, Hong Kong's Hang Seng gained 0.9 per cent and mainland China's Shanghai Composite Index rose marginally.

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 81 cents to $29.43.

Treated lumber company Stella-Jones Inc. (TSX:SJ) said quarterly net income grew to $16.6 million, or $1.03 a share. That's an increase from $12.4 million, or 78 cents per share, a year ago. Sales rose to $181.8 million from $161.3 million and its shares ran ahead 60 cents to $40.35.

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