* TSX closes up 279.38 pts, or 2.3 pct, at 12,465.44
* Biggest single-day gain in more than two weeks
* Financials, energy sectors lead gains
* First Quantum Minerals soars 14.2 pct (Adds details, comments)
By Jon Cook
TORONTO, Oct 27 (Reuters) - Canadian stocks soared more than 2 percent on Thursday to their highest level in nearly two months, buoyed by optimism over a long-awaited deal by European leaders to tackle the euro-zone debt crisis.
The agreement included a plan to leverage the euro zone's bailout fund to 1 trillion euros, a 50 percent haircut for private holders of Greek debt and bank recapitalization. [MKTS/GLOB]
While the news was cheered by the markets, analysts were guarded about the sustainability of the rally.
"There's a lot of hard sledding yet to go and the devil is always in the details, but the broad outline of this is pretty positive," said Robert Gorman, chief portfolio strategist at TD Waterhouse. "I'm sure we'll have some backing and filling here, but I suspect we will move higher."
Financial stocks, up 2.8 percent, played the biggest role in leading the market higher. Canadian banks have traded in sympathy with European lenders for much of the crisis even though they have little or no exposure to Greece.
Royal Bank of Canada (RY.TO) did the most to lead the financial sector higher, posting a 3.1 percent gain to C$49.66.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended up 279.38 points, or 2.3 percent, at 12,465.44, its biggest one-day gain in more than two weeks. The session high was 12,526.29, its highest level since Sept. 9.
Energy stocks, up 3 percent, were also a major driver. Oil rallied more than 4 percent as the European deal and supportive U.S. data eased concerns that economic weakness could curb energy demand. [O/R]
Shares of Suncor Energy Inc (SU.TO), up 4.9 percent at C$32.80, led the sector and market higher.
A 7.7 percent rally in base metal miners helped drive the heavyweight materials sector higher as copper prices jumped on the European news. [MET/L]
Teck Resources TCKb.TO led the sector, gaining 8.1 percent to C$40.35 after news its third-quarter net income more than doubled, driven by strong results from its coal and copper businesses. [ID:nN1E79P2GI]
First Quantum Minerals (FM.TO) was also among the biggest gainers, jumping 14.2 percent to C$21.24.
After reporting a doubling in its third-quarter profit, Potash Corp (POT.TO) shares were up 1.4 percent at C$50.46 as strong grain prices boosted demand for the world's top fertilizer maker's products. [ID:nN1E79P2GK]
Miner Barrick Gold (ABX.TO) climbed 0.9 percent to C$48.61 after reporting a 45 percent increase in quarterly profit, driven by a sharp increase in bullion prices. [ID:nN1E79P2GN]
In other Canadian company news, BlackBerry maker Research In Motion Ltd's RIM.TO shares rose 1 percent to C$21.10, a day after plunging nearly 8 percent.
RIM lagged the rally after it was hit by a class action lawsuit filed by consumers in the United States and Canada for a days-long service outage earlier this month. ID:nN1E79Q0QH]
Solid U.S. economic news contributed to the market's euphoria, as data showed third-quarter GDP growing at its fastest pace in a year. [ID:nN1E79Q0FK]
Analysts said the positive U.S. data and the European deal had helped quell fears of a double-dip recession, but warned the good news was unlikely to produce an influx of new institutional investing.
"I don't think the institutional money out there is really at that point where it's (saying) 'OK, let's dive in and see what happens'," said Andrew Pyle, wealth adviser and associate portfolio manager at ScotiaMcLeod.
Pyle added a key factor in the recovery will be what happens to European pension funds and life insurance companies that are exposed to Greek debt.
"What happens to them when you take a 50 percent haircut on Greek debt? That will be one of the questions that has to be answered," Pyle said.
($1=$0.99 Canadian) (Editing by Jeffrey Hodgson and Peter Galloway)