TORONTO (Reuters) - Canadian stocks enjoyed their biggest single-day gain of 2012 on Tuesday and reached a near two-month high, as mining and energy shares soared on hopes major central banks will ease policy to revive a world economy hit hard by Europe's debt crisis.
A raft of weak economic data has raised expectations that the European Central Bank will cut interest rates to a record low on Thursday, a move that could drive stock markets higher and further lift commodities like oil and copper.
"It was a brutal month last month for a lot of people, so you usually get some money coming back to work at the beginning of the month," said Sid Mokhtari, market technician and director, institutional equity research, CIBC World Markets.
All of the Toronto market's 10 main sectors finished in positive territory.
Leading the way was the heavily-weighted materials group, home to mining stocks, which climbed 4.1 percent as copper hit a seven-week high and gold rallied.
Influential gainers included Goldcorp Inc (G.TO), which rose 4.1 percent to C$39.90, Barrick Gold (ABX.TO), up 3 percent at C$39.50, Potash Corp (POT.TO), up 2.9 percent to C$45.77 and Teck Resources TCKb.TO, which climbed 3.9 percent to C$32.77.
The energy sub-index jumped 3.3 percent, tracking a U.S. crude price which rose more than 4 percent as mounting tension over Iran's nuclear program sparked concerns about supply threats.
Suncor Energy (SU.TO) shares rose 4.3 percent at C$30.71, playing the biggest role of any company in leading the market higher. Canadian Natural Resources (CNQ.TO) was up 4 percent at C$28.41 and Cenovus Energy Inc (CVE.TO) jumped 5 percent to C$33.97.
"You're getting a very nice bounce in crude over the past two days," said Mokhtari, who noted U.S. oil has gained about $10 a barrel since hitting an eight-month low last week.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE finished up 252.19 points, or 2.2 percent, at 11,848.75.
The index at one point touched 11,885.33, its highest level since May 4.
In economic news, new orders for U.S. factory goods rose more than expected in May and Canadian manufacturing activity climbed in June to its highest level since September.
The data followed bleak U.S. numbers on Monday that showed U.S. manufacturing shrank in June for the first time in three years, according to the Institute for Supply Management.
"That ISM number yesterday was quite a disappointment," said Philip Petursson, director of the portfolio advisory group at Manulife Asset Management. "Investors are expecting more stimulus out of the global central banks, including the Fed and Chinese officials, which would be positive for commodities."
Expectations also rose for an imminent cut in the amount of money banks in China are required to hold as reserves after a state-backed paper urged the move in a front-page editorial.
The Toronto market, which was closed on Monday for a national holiday, extended its gains from last week, as markets rallied on Friday after euro zone leaders agreed on measures to cut soaring borrowing costs in Italy and Spain and recapitalize banks.
On Tuesday, the financial subindex rose 1.3 percent, led by Canada's top banks. Royal Bank of Canada (RY.TO) climbed nearly 1.8 percent to C$53.09, Bank of Montreal (BMO.TO) gained 2 percent to C$57.37, and Toronto-Dominion Bank (TD.TO) was up 1 percent at C$79.74.
However, analysts remained cautious, adding Europe still has not achieved anything concrete to assuage investor fears.
"We've had four days of strong reversals with good follow through, but to say that this has been completely reversed to the upside is extremely premature," said Mokhtari.
On the negative side, Research In Motion RIM.TO continued its slide, falling 1.3 percent to C$7.44. Chief Executive Thorsten Heins said on Tuesday there is nothing wrong with the company as it exists now, denying the maker of BlackBerry smartphones is in a "death spiral.
Editing by Jeffrey Hodgson