Stocks surge on hopes for debt crisis fix, strong U.S. retail showing

An increased appetite for risk and higher commodity prices helped push the Canadian dollar up 1.29 cents to 96.58 cents US.

The January crude contract on the New York Mercantile Exchange was up $1.44 to US$98.21 a barrel.

New York markets also registered big gains as the Dow Jones industrial index shot up 291.23 points to 11,523.01.

The Nasdaq composite index ran ahead 85.83 points to 2,527.34 and the S&P 500 index was up 33.88 points to 1,192.55.

Sentiment also got a big boost from signs of a strong start to the U.S. holiday retail season, otherwise known as Black Friday. Americans’ willingness to open their wallets has eased concerns that the world’s largest economy will slide back into recession.

Meanwhile, investors are clearly hoping that the recent signs of deterioration in the debt crisis will finally get Europe’s leaders to agree on a package of measures that can ease market concerns over whether the euro currency itself can survive.

Worries about the debt crisis hit stock markets hard last week with the TSX dropping 3.6% and the Dow industrials tumbling 4.78%.

Markets were particularly disappointed during the week at the technical failure of a German bond auction.

And borrowing rates for Italy hit the seven per cent level for the country’s 10-year bonds last week, a level generally considered to be unsustainable.

On Monday, The Associated Press reported that under a new proposal, the 17-country eurozone will use the European Financial Stability Facility to insure the bonds of troubled countries within the bloc.

According to draft guidelines obtained by the news agency, bonds being issued in the future would receive fixed credit protection equal to 20 to 30%. The actual rate would be determined “in light of market circumstances.”

Analysts also pointed to a weekend report from Reuters that France and Germany were working on a much faster way towards eurozone fiscal integration.

Such a plan would start off with a core zone of eight to 10 countries instead of involving all 27 EU countries.

“It’s rumours, it’s talk about action but it’s better than what we saw in the last three weeks,” said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis.

“You’re seeing how desperate investors are for reassurance, that someone is paying attention and that they will do something, even if it’s not enough and all it does is temporarily reassure everyone that they will take steps in the right direction.”

Meanwhile, Italy paid sharply higher borrowing rates in an auction Monday. The interest rate Italy had to pay to get investors to part with their cash for 12 years skyrocketed to 7.20%, a full 2.7 percentage points higher than the last similar auction.

And credit rating agency Moody’s warned that the “rapid escalation” of Europe’s financial crisis is threatening the creditworthiness of all eurozone governments, even the most highly rated. Only six of the eurozone’s 17 countries have the top rating — Germany, France, Austria, the Netherlands, Luxembourg and Finland.

There was also a stern warning from the Organization for Economic Co-operation and Development, which said policy makers around the world must “be prepared to face the worst,” as the economic impact of Europe’s debt crisis threatens to spread around the developed world.

The TSX energy sector advanced 2.66% while Suncor Energy (TSX:SU) climbed 77 cents to $28.91 and Cenovus Energy (TSX:CVE) was up 94 cents to $31.09.

The base metals component was ahead 5.28% as the December copper contract in New York gained nine cents to US$3.36 a pound. Quadra FNX Mining (TSX:QUX) rose 45 cents to C$9.89 while Teck Resources (TSX:TCK.B) was ahead $1.20 to C$33.86.

Gold stocks were also higher as the December gold contract climbed $25.10 to US$1,710.80 an ounce. Barrick Gold Corp. (TSX:ABX) improved by $1.02 to C$51.18 and Goldcorp Inc. (TSX:G) gained 34 cents to C$50.72.

Hopes for a resolution to the European debt crisis also pushed bank stocks higher as Scotiabank (TSX:BNS) climbed 75 cents to $49.05 and Royal Bank (TSX:RY) rose 92 cents to $44.32.

European markets were sharply higher as London’s FTSE 100 index gained 2.87%, Frankfurt’s DAX climbed 4.6% and the Paris CAC 40 jumped 5.46%.

In corporate news, Canadian uranium producer Cameco Corp. (TSX:CCO) has backed away from trying to acquire Hathor Exploration Ltd. (TSX:HAT), owner of the Roughrider deposit in Saskatchewan. Hathor is supporting a rival $654-million bid from Anglo-Australian mining giant Rio Tinto PLC (NYSE:RIO). Hathor shares slid 36 cents to $4.69 and Cameco was up 86 cents to $18.23.

There’s a potential hostile takeover battle involving two of eastern Canada’s largest real-estate trusts. Cominar REIT (TSX:CUF.UN) of Quebec City is offering to buy out other investors in Canmarc, (TSX:CMQ.UN), formerly known as Homburg REIT.

Cominar says it has increased its stake in Canmarc to 15.1% and is offering $15.30 cash for each Canmarc unit it doesn’t already own. The bid values Canmarc at about $838.2 million, including the stake Cominar already owns. Canmarc units jumped $2.52 or 18.98% to $15.80 and Cominar units were ahead 44 cents to $22.13.

Paramount Resources Ltd. (TSX:POU) shares gained $1.64 to $38.88 after it said it has reorganized its operations and plans to spin out its oilsands and bitumen businesses into a new wholly owned subsidiary, Pixar Petroleum Corp.