* TSX up 167.98 pts, or 1.4 pct, at 12,276.85
* Italian senate passes austerity measures package
* Mining stocks lead rally (Adds analyst's comments, details)
By Jon Cook
TORONTO, Nov 11 (Reuters) - Toronto's main stock index ended a volatile week of trading more than 1 percent higher on Friday as commodity prices rose on renewed investor optimism that Europe is taking steps to deal with its debt crisis.
Moves by debt-riddled Italy and Greece to grapple with the crisis provided a much-needed lift to global stocks, which have swayed with the headlines from Europe for the last month.
The Italian senate passed an EU-mandated package of austerity measures to address the country's near 2 trillion euro (2.7 trillion) debt. Approval by the lower house on Saturday was seen as a matter of course, relieving market anxiety that Italy would become the euro-zone's next bailout case. [MKTS/GLOB]
In Greece, a new coalition government was proceeding on a plan to secure an 8 billion euro aid tranche to prevent it from running out of cash next month. [ID:nA8E7MA00N]
Adding to the positive sentiment from Europe, the U.S. economy showed signs of shaking off its doldrums this week, with a new Thomson Reuters/University of Michigan index on consumer sentiment rising to its highest level in five months. [ID:nN1E7AA0I3] This came on the heels of a dip in U.S. jobless numbers.
"When the political news is neutral the global growth story shines through, the markets tend to rally," said Stephen Wood, chief investment strategist forth North America at Russell Investments.
After two straight down sessions, the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended the week up 167.98 points, or 1.4 percent, at 12,276.85.
The index's heavily weighted materials sector, home to base-metal and gold miners, surged 2.5 percent, nearly erasing Thursday's losses.
Goldcorp Inc (G.TO) led the sector, rising 4.4 percent to C$54.58 as bullion prices increased for the third straight week. [GOL/]
Base metals miners performed strongly, boosted by copper's first gain in nearly a week [MET/L], jumping 2.4 percent. The sector was led by First Quantum Minerals (FM.TO), which was up more than 4 percent at C$18.97 after falling more than 20 percent the last two sessions.
"Commodity prices look like they have some bounce to them," said Paul Taylor, chief investment officer at BMO Harris Investment Management Inc.
"If we get by the euro zone issues again, the economic indicators are inconsistent with an outright global economic recession, so that's not a bad backdrop for what we produce in abundance here in Canada," Taylor said.
Teck Resources TCKb.TO was also among the sector's top gainers, rising 1.5 percent to C$38.31.
Nine of the index's 10 main sectors were higher, with energy and financials showing solid gains.
Suncor Energy Inc (SU.TO) climbed 2.4 percent to C$32.36 to lead energy stocks, which rose 1.5 percent as oil prices rode the commodities wave. [O/R]
TransCanada Corp (TRP.TO) was the next biggest gainer, rising 2.4 percent to C$40.81, a day after the United States announced it would delay a decision on whether to approve its proposed $7 billion Keystone XL pipeline for 18 months. [ID:nN1E7A80X4]
Financial stocks were led higher by Royal Bank of Canada (RY.TO), whose shares rose 1.4 percent to C$45.65.
Power Financial Corp's (PWF.TO) shares were up 2.4 percent at C$26.11 after it reported a higher profit due to stronger results at its insurance and mutual fund subsidiaries. [ID:nN1E7AA0T5]
($1=$1.01 Canadian) (Editing by Peter Galloway)