TSX to move higher amid hopes for resolution of eurozone debt crisis

U.S. futures were sharply higher with the Dow Jones industrial futures ahead 138 points to 12,138, the Nasdaq futures gained 30.5 points to 2,333.8 and the S&P 500 futures gained 16.1 points to 1,259.6.

This is a crucial week for the future of the euro as the government debt crisis has worsened recently, with market non-confidence spreading from heavily-indebted countries such as Italy to the healthiest members of the eurozone, including Germany where a bond auction failed almost two weeks ago.

But optimism that European leaders can come up with a convincing plan picked up last week after central banks moved to improve commercial banks’ ability to borrow U.S. dollars to fund their operations.

And German Chancellor Angela Merkel has said she wants to change the basic EU treaty to achieve a closer political and economic union of the 17 euro countries, including stricter budgetary oversight.

She was to discuss these proposals Monday with French President Nicolas Sarkozy.

Tighter integration on budget matters could lead to further emergency aid from the European Central Bank, possibly through the International Monetary Fund.

The Merkel-Sarkozy plan will define the agenda for a meeting in Brussels on Friday by the leaders of all 27 EU countries. At stake is the survival of the euro, whose break-up would push Europe and the global financial system into chaos.

Optimism that leaders can deal with the crisis pushed stock markets sharply higher last week with the TSX surging 5.34% while the Dow industrials ran ahead seven per cent.

Commodities were mixed Monday with the January crude contract on the New York Mercantile Exchange ahead 69 cents to US$101.65 a barrel.

March copper prices were off a penny to US$3.57 on the Nymex after rising almost 10% last week after China, the biggest consumer of the metal, announced moves to ease lending and encourage growth.

Bullion prices fell back with the February contract in New York down $17 to US$1,734.30 an ounce.

European markets registered solid gains Monday with London’s FTSE 100 index up 0.74%, Frankfurt’s DAX ran up 0.98 points while the Paris CAC 40 rose 1.56%.

Earlier in Asia, Japan’s benchmark Nikkei 225 index added 0.6 per while Hong Kong’s Hang Seng rose 0.7%. South Korea’s Kospi ended 0.4% higher.

Mainland Chinese shares lost ground on worries over the economic outlook. The benchmark Shanghai Composite Index lost 1.2%.

In corporate news, Frontier Rare Earths Ltd. (TSX:FRO) has reached an agreement with Korean government-owned Korea Resources Corp. intended to accelerate development of its Zandkopsdrift rare earth project in South Africa. Korea Resources also announced that it plans to form a consortium comprised of Korean companies to join the Frontier joint venture.

In the U.S., Commercial Metals Co. has rebuffed billionaire investor Carl Icahn’s US$1.73 billion takeover offer, saying the proposal undervalues the scrap-metal processor. On Friday, Icahn told Commercial Metals’ board that it had until Monday at 9 a.m. Eastern time to set up a meeting to discuss his $15 per share offer, which was a seven per cent premium to Commercial Metals’ Friday’s closing stock price.