* TSX up 78.78 points, or 0.59 percent, at 13,332.92
* Eight of 10 main sectors stronger
* U.S. housing starts spark rally
* Bank of Canada sets stage for next rate hike
* Golds heaviest decliners as bullion snaps 11-day uptrend (Adds details)
By Ka Yan Ng
TORONTO, July 19 (Reuters) - Toronto's main stock index closed higher on Tuesday as investors were cheered by healthy U.S. earnings and housing starts figures, which offered relief from worries about the U.S. and European debt crises.
U.S. housing starts jumped to a six-month high in June, up 14.6 percent from a month earlier, while building permits were also unexpectedly higher.
The report offered hope for the distressed U.S. housing sector, which has been a major laggard in the economic recovery. [ID:nN1E76I0AD]
Prices for oil, copper and other key resources rallied in response to the data, sending shares on Toronto's commodity-heavy market higher.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 78.78 points, or 0.59 percent, at 13,332.92, its highest finish in more than a week.
Eight of the index's 10 main sectors were up, rising on renewed hope for the U.S. economy. The oil and gas group posted the biggest gain, up 1.83 percent. [O/R] [MET/L]
"The new housing starts actually beat estimates, and they actually not just beat consensus, they beat the most optimistic estimates out there," Marcus Xu director of equity investments at Genus Capital Management in Vancouver.
"It's a bit of a surprise because we all know the U.S. housing market has been one of the most disappointing sectors."
Top advancers in Toronto were Suncor Energy (SU.TO), up 2.24 percent at C$38.39, while Potash Corp (POT.TO) gained 2.34 percent to C$57.62. Canadian Natural Resources (CNQ.TO) climbed 2.36 percent to C$40.42, while Toronto-Dominion Bank (TD.TO) was up 1.46 percent at C$79.42.
On the downside, gold miners slid 2.53 percent as bullion prices eased from record highs, snapping an 11-day rally, as safe-haven demand dropped. That weighed on the index's materials group, which declined 0.73 percent.
Goldcorp Inc (G.TO), off 2.69 percent at C$51.37, was the heaviest decliner after helping to lead the gains on Monday. Barrick Gold (ABX.TO), the world's biggest gold producer, was down 1.74 percent at C$46.21. Eight of the 10 most heavily weighted decliners were gold miners.
News that U.S. President Barack Obama's support for a bipartisan proposal that promises $3.75 trillion in debt-reduction over 10 years also helped keep stocks well-supported during the session.
Also, quarterly numbers from technology bellwether International Business Machines Corp and soft-drink giant Coca-Cola helped underscore sentiment that the U.S. earnings season is off to a solid start.
HINTS OF HIGHER INTEREST RATES
The Bank of Canada held its key interest rate steady at 1 percent, as expected, on Tuesday morning. However, in its statement accompanying the rate decision, the bank hinted more strongly than before that it would resume hiking rates soon.[ID:nN1E76I045]
John Kurgan, senior market strategist at commodity futures brokerage Lind Waldock, said the statement served to attract investment to the domestic market.
"I don't think interest rates are going to skyrocket here, but I think investors worldwide are going to take some comfort when they look towards Canada. They're going to see a firm currency, they're going to see an economy that is getting back to normal," he said.
"A lot of these things right across the board are showing me that the Canadian economy is going to be the envy of the world here."
($1=$0.95 Canadian) (Reporting by Ka Yan Ng; editing by Peter Galloway)