Loonie, stocks surge on European bailout optimism

North American stock markets opened sharply higher on Tuesday amid optimism that aEuropean bailout deal can be reached.

Reports suggest the deal could include a Greek default on 50 per cent of its debts, a big expansion of a European stabilization fund and a arecapitalization ofbanks at risk.

Greece's finance minister also said his country wouldreceive the next round of bailout loans in time to avoid a default.

Buoyed by the news,the S&P/TSX composite indexsurged more than 300points at one point during the day. It ultimately finished at 11,821.1, up 113.9 from Monday. Tuesday's gains came after a Monday in which the index gained 244 points and last week's drop of more than 900 points.

On Wall Street, the Dow Jones industrial averagealso could not hang on its 300-point intraday gains. The Dow closed up 146.83 at 11,190.69.

Commodity prices gained ground as investors seemed to believe the bailout could help avoid aneconomic slowdown. The price of light sweet crude rose$4.21 to finish at $84.45 US per barrel.

The Canadian dollar, which is closely tied to the price for oil and commodities, gained 0.75 of a cent to reach 98 cents US. The Euro andBritish poundwere also higherasinvestors reversed course from last week's flightto the relative safety ofU.S. dollar.

Investors also jumped back into gold. On the New York Mercantile Exchange, gold for Septemberrose 58.10 to settle at $ 1650.60 US an ounce.

Septembersilver also enjoyed a bounce, climbing $1.57 to finish regular trading at $31.50 US an ounce.

Enthusiasm for the potential bailout deal helped boost Europeanstocks indices.

The U.K.'s FTSE 100 enjoyed itsbiggest one-daysince May 2010, adding four per cent. France's CAC 40 index rose by 5.7 per cent, whileGermany's Dax added 5.3 per cent.

Earlier, Japan's Nikkei 225 shot up 2.8 per cent to close at 8,609.95, a day after ending at its lowest level since April 2009. South Korea's Kospi rallied 5 per cent to 1,735.71. Hong Kong's Hang Seng jumped 4.2 per cent to 18,130.55.