Commodities drive TSX higher

Higher oil and gold prices helped the Toronto Stock Exchange post a strong advance Monday, building on gains made during last week's wild swings on global markets.

The S&P/TSX composite index closed up 141.41 points, or 1.13 per cent, at 12,683.61. The heavily-weighted energy sector rose 1.5 per cent on the strength of higher oil prices. September oil gained $2.50 to close at $87.88 US a barrel on the New York Mercantile Exchange.

The TSX financial index was 1.0 per cent higher.

Golds advanced as bullion futures surged $15.20 US an ounce to $1,755.50 an ounce.

In New York, the Dow Jones Industrial Average ran ahead 213.88 points, or 1.90 per cent, to 11,482.90, erasing all of its losses since the Standard and Poor's downgrade of the U.S. credit rating on Aug. 5. But the S&P/TSX is still down two per cent since the end of July and the Dow is 5.4 per cent below its level then.

The Canadian dollar added 1.11 cents to 102.05 cents US.

'Merger Monday'

Several large corporate deals helped to increase investor confidence.

Early Monday morning, TD Bank announced it would purchase the Canadian credit card business of MBNA Canada from Bank of America Corp., which has about $8.5 billion in receivables .

TD said the price included a "modest premium" of about $100 million on top of the value of MBNA Canada's $8.5 billion of credit card receivables. 

Google announced plans to acquire wireless phone maker Motorola Mobility for $12.5 billion US.

As well, Time Warner Cable Inc. said it will pay $3 billion in cash for Insight Communications Co., which has more than 750,000 cable customers in the U.S. Midwest.

In the energy industry, offshore driller Transocean Ltd. said it will buy Aker Drilling of Norway for $1.43 billion in cash.

Companies across the United States have a record amount of cash that they have accumulated since the recession ended. They have increased their cash reserves every quarter for more than two years, and businesses in the S&P 500 index had a total of $963.3 billion US at the end of March, according to the most recent data from Standard & Poor's.

"A calmer tone has settled over the markets after last week's turmoil," said Jane Foley, an analyst at Rabobank International.

Bargain hunters continued to buy after last week's rout picked up speed as worries grew about Spain, Italy and France getting caught up in the European debt crisis and amid fears that the U.S. economy would slide back into recession.

"You might have these moments of quiet, but the debt crisis in Europe did not go away," said John Hailer, chief executive for the U.S. and Asia of Natixis Global Asset Management.

"Our issues with the debt, with what our tax policy is going to be going forward, our unemployment did not go away."

"We are probably going to have to look at some very different levels of volatility than what a lot of investors grew up with over the last 25 to 30 years," he said.

European markets up

European markets were positive with London's FTSE closing up 0.6 per cent, France's CAC ahead 0.8 per cent and Germany's DAX up 0.4 per cent.

Europe's debt crisis will also be in the spotlight this week, particularly on Tuesday when French leader Nicolas Sarkozy and German Chancellor Angela Merkel meet, and second-quarter euro zone growth figures are published.

"The Franco-German summit on Tuesday in Paris will be a major focus for financial markets this week, especially coming so shortly after what has been a very tumultuous week for France in financial markets," said Jan Dubsky, euro area economist at the Royal Bank of Scotland.

Of particular interest will be what the two leaders say about the viability of a eurobond as a potential solution to Europe's debt crisis, which has already seen three euro zone countries get bailed out. With a eurobond, the 17 countries that use the euro would jointly issue debt.

In Asia, stock markets rose Monday as data showed the economy of earthquake-battered Japan shrank at an annualized rate of 1.3 per cent in the April-June quarter, much better than the 2.6 per cent many economists had forecast.

Japan's Nikkei 225 index closed up 1.4 per cent at 9,086.41 while Hong Kong's Hang Seng index shot up 3.3 per cent to 20,260.10.