TSX surges 287 points on signs Europe set to tackle bank problems

The Canadian dollar jumped 0.98 of a cent from Friday’s close to 97.29 cents US as the pace of home construction picked up sharply last month and oil prices advanced.

Canada Mortgage and Housing Corp. said housing starts rose to a seasonally adjusted annual rate of 205,900-thousand units. Strength was focused in the Atlantic region, Quebec and British Columbia and concentrated on multiple-unit urban starts such as condos, which increased 14.2%.

U.S. indexes were mixed after markets surged Monday following comments from German Chancellor Angela Merkel and French President Nicolas Sarkozy who said they would finalize a “comprehensive response” to the debt crisis by the end of the month, including a plan to make sure that banks have adequate capital.

Stock markets have been intensely volatile recently on worries that a debt default in Greece or another eurozone country would trigger a crisis for under-capitalized European banks.

The Dow Jones industrial index was off 16.88 points to 11,416.3.

The Nasdaq composite index gained 16.98 points to 2,583.03 and the S&P 500 index edged 0.65 of a point higher at 1,195.54.

Meanwhile, word came out shortly after the market close that Slovakia’s Parliament had rejected the expansion of the euro currency zone’s bailout fund for heavily indebted governments. Sixteen other eurozone parliaments had already approved the measure. There had been doubt about the results of the vote after that country’s coalition leaders failed to agree on a deal to approve the measure.

The changes would allow the fund to buy government bonds and to provide a backstop to European banks.

The 17 countries that use the euro must all approve expanding the powers of the bailout fund, which is designed to shore up Europe’s defences against the debt crisis.

“It’s a very cumbersome process,” said Chris King, portfolio manager at Morgan, Meighen and Associates.

“I think that the world’s capital markets realize there are so many players involved that it’s very difficult to arrive at a resolution in a timely manner.”

In other European developments, Greece’s international debt inspectors have completed their review of the government’s reforms. The inspectors from the International Monetary Fund, the European Commission and European Central Bank say that if their conclusions are adopted by the eurozone and the IMF, Athens is likely to receive the next batch of its bailout loans in early November.

Tuesday also marked the start of the third-quarter earnings reporting season with a big disappointment. U.S. Aluminum giant Alcoa Inc. reported third quarter profit of 15 cents a share, far below expectations of 22 cents a share.

However, revenue came in at US$6.42 billion versus expectations of $6.22 billion.

Alcoa is regarded as a bellwether for the resource sector as its products are used in a huge variety of products, including automobiles, aircraft and infrastructure.

The TSX energy sector ran up 3.55% as oil prices added to Monday’s strong gains with the November crude contract on the New York Mercantile Exchange up 40 cents at US$85.81 a barrel. Suncor Inc. (TSX:SU) rose 78 cents to C$28.85 and Canadian Natural Resources (TSX:CNQ) advanced $1.01 to $31.21.

Metal prices softened after making solid advances Monday. But the base metals sector gained 3.81% even as copper prices gave back about three quarters of Monday’s advance with the December contract down eight cents to US$3.28 a pound. First Quantum Minerals (TSX:FM) was up 50 cents at C$ and Teck Resources (TSX:TCK.B) rose $1.64 to $35.29.

Railway stocks rose alongside energy and mining issues, with Canadian National Railways (TSX:CNR) gaining $1.33 to $73.59 and Canadian Pacific Railway (TSX:CP) up $1.23 to $53.50.

Financials were also strong as Royal Bank (TSX:RY) moved up 65 cents to $47.95 amid word that the bank is in talks to acquire the remaining stake of its joint venture with Dexia, the Belgian bank that’s in financial trouble.

Luxembourg Finance Minister Luc Frieden told a news conference late Monday that both sides are near a deal. RBC Dexia Investor Services is equally owned by Royal Bank and Dexia. CIBC (TSX:CM) climbed $2.04 to $75.54.

Gold stocks were also higher as the December bullion contract in New York declined $9.80 to US$1,661 an ounce. Barrick Gold Corp. (TSX:ABX) improved by 88 cents to $49.32 and Kinross Gold Corp. (TSX:K) climbed 45 cents to $14.61.

In other corporate news, BlackBerry users experienced technical glitches with their smartphones for a second day after an unexplained problem cut off Internet and messaging services in Europe, South America, the Middle East and Africa.

But its shares rose 84 cents to $25.14 after Vic Alboini, chairman and chief executive of Toronto-based RIM shareholder Jaguar Financial Corp., said a total of 12 institutional shareholders which own about eight per cent of RIM stock are calling for changes at the company.

Air Canada (TSX:AC.B) shares dipped three cents to $1.38 as the carrier said it was “evaluating its options” in the face of a possible strike by its 6,800 flight attendants early Thursday. The attendants, represented by the Canadian Union of Public Employees, rejected a deal on the weekend that had been negotiated by CUPE.

Daylight Energy (TSX:DAY) shares surged $5.05 or 110% to $9.62 in the company’s first day of trading following a proposed $2.2-billion takeover by China’s Sinopec. Sinopec’s bid is worth $10.08 per share.

Shares in engineering company Genivar (TSX:GNV) were up $1.80 to $24.59 after it said Monday it has bought geomatics and surveying firm Le Groupe Giroux for an undisclosed amount.