TORONTO (Reuters) - Toronto stocks kicked off the new year on Tuesday with their biggest one-day rise in more than a month as energy and mining issues were boosted by healthy economic data and hopes the U.S. Federal Reserve would further ease monetary policy.
Better than expected manufacturing, jobs and construction data from China, Germany and the United States helped rejuvenate commodity stocks and increased investor risk appetite in the first trading session of 2012.
"We started off with a bang and a lot of that was off better global economic data," said Philip Petursson, managing director, portfolio advisory group at Manulife Asset Management.
The day's surge began with Chinese data that showed the Purchasing Managers' Index (PMI) rose to 50.3 in December from 49 in November, indicating a slight expansion in business activity in the country's factory sector.
"The fact that speculation of a hard landing is proving to be largely unfounded in China is just allowing investors to take the foot off the brakes and re-accelerate," said Petursson.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended up 253.34 points, or 2.12 percent, at 12,208.43, its biggest one-day gain since November 30.
The TSX ended 2011 down more than 11 percent to record its first year-on-year decline since 2008.
Eight of its 10 main sectors were higher on Tuesday, led by a jump of more than 4 percent in the heavily weighted materials index.
Potash Corp (POT.TO) led the sector's charge, rising 5.1 percent to C$44.26, as China is among the world's largest purchasers of fertilizer.
"Any kind of good news out of China tends to have a direct positive impact on Canadian stocks," said Robert Kavcic, an economist with BMO Capital Markets. "Especially since (China) was in contraction territory last month and we haven't seen that since early 2009."
Data on Tuesday also showed German unemployment fell more than forecast, which followed on Monday's German manufacturing PMI that showed less contraction than expected.
Investors hoped the improved German outlook was a sign the euro zone economy was recovering after being battered by the region's debt crisis for months.
Toronto mining stocks cheered the brighter global outlook, with base metal miners rising 5 percent. China is the largest single buyer of industrial metals such as copper, which hit a three-week high.
Teck Resources TCKb.TO added 6.9 percent to C$38.37 and First Quantum Minerals (FM.TO) rose 4.1 percent to C$20.87.
Gold mining issues climbed more than 3.5 percent, led by Barrick Gold, (ABX.TO) which was up 4.3 percent to C$48.13.
Energy shares got a lift as oil prices rose more than 4 percent on the economic data and worries about supply shortages due to Iran's threat to block shipping in the Strait of Hormuz and turmoil in Nigeria and Iraq.
Canadian Natural Resources (CNQ.TO) was up 4.4 percent at C$39.82.
Stocks also rallied on data showing U.S. construction spending surged to a near 1-1/2 year peak in November and manufacturing activity grew at its fastest pace in six months in December, with new orders up also.
"That goes in hand with a lot of the other indicators we've seen coming out of the U.S. the past month or two, which have been pretty consistently improving," said Kavcic.
Investors were also hopeful the U.S. central bank may hold interest rates low for longer than previously expected.
Minutes from its December 13 meeting, released on Tuesday, showed a number of Fed officials believed economic conditions could "well" warrant a further easing of monetary policy. The Fed has held the overnight federal funds rate close to zero since December 2008.
The TSX's rally was the largest since the end of November, when the Fed and the European Central Bank led a move to lower the cost of U.S. dollar swap lines by 50 basis points.
In individual company news, Research In Motion RIM.TO shares rose more than 6 percent to C$15.71 after a newspaper reported the BlackBerry maker was on the verge of stripping its co-chief executives of their other shared roles as chairmen of the board.
Editing by Rob Wilson