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TORONTO (Reuters) - Toronto's main stock index ended higher on Tuesday, building on a rally that began late on Monday, as optimism grew that euro zone policymakers were readying decisive action to tackle the region's debt crisis.
The index surged nearly 3 percent in intraday trade, hitting a session high of 12,057.95, as European officials were seen considering plans to increase the size of the bailout fund and to recapitalize banks.
But sharp selling heading into the close highlighted investors' ongoing nervousness.
"We're kind of on a roller coaster ride here, all the focus on the sovereign debt problems in Europe," said John Kinsey, a portfolio manager at Caldwell Securities Ltd.
"Today is one of those days where people are optimistic that something may happen, and it looks like maybe they're on track to get something accomplished ... (but) tomorrow could be another one of those bad days."
The Toronto Stock Exchange's S&P/TSX composite index ended the session up 113.90 points, or 0.97 percent, at 11,821.09.
Base-metal miners and energy issues led the gains as commodities rebounded across the board. Suncor Energy was up 2.6 percent at C$28.38, while First Quantum Minerals surged 9.7 percent to C$16.40.
Financial stocks rose 0.7 percent. Bank of Nova Scotia gained 1.3 percent to C$52.97 and Manulife Financial was up 2.1 percent at C$12.25.
All of the 10 main index groups were higher, but gold miners weighed on the broader materials sector, falling 1.5 percent, despite strength in the metal itself.
Kinross Gold was the heaviest decliner, down 3.05 percent at C$15.28, while Goldcorp fell 1.3 percent to C$47.05.
The TSX hit a 14-month low early on Monday before European leaders said they would beef up the euro zone's rescue fund to contain the debt crisis, news that have the market a boost of more than 2 percent.
But market volatility could remain as traders react to headlines and attempt to gauge the commitment of governments and institutions as they work to prevent a Greek default.
"The market is an opinion poll and the opinion was that things were going to get really nasty until they get their act together," said Barry Schwartz, vice-president and portfolio manager at Baskin Financial Services.
"I think the market is getting a sense that they have gotten their act together ... We'll see what they come up with and whether it works."
In individual company news, BlackBerry maker Research In Motion rose 3.6 percent to C$23.15 on market speculation that activist investor Carl Icahn had taken a stake in the company.
Shares of Ivanhoe Mines were up 16.13 percent at C$17.42 after Rio Tinto raised its stake in the company amid tensions over Mongolian plans to renegotiate a landmark agreement on the development of the big Oyu Tolgoi copper-gold project.
Editing by Jeffrey Hodgson and Rob Wilson