Canadian oil stocks gained new life Tuesday as crude prices climbed 10 per cent to $70.53 US a barrel on increasing appeal for the commodity as the U. S. dollar fell against the euro. The jump in commodity prices and optimism interest rate cuts will spark global economic drivers also lifted the Canadian dollar to a three-week high. The loonie closed at 86.87 cents against the U. S. dollar, gaining 2.6 per cent from Monday. The move followed oil's $7 US rebound, which pulled up Canadian oil and gas stocks and the Toronto Stock Exchange. Canada's main stock index roared above 10000 points Tuesday on the commodity rally to reach its highest level in two weeks. Up more than 400 points in intra-day trading, the S&P/ TSX composite index ended the day up 395.32 points, or 4.07 per cent, to 10116.58. Suncor Energy Ltd. climbed six per cent to $28.82 on Tuesday, erasing the previous day's losses. Canadian Natural Resources Ltd. was one of the most active stocks on the day, with more than 2.5 million shares trading hands. It climbed nine per cent to $62.70. Canadian Oil Sands Trust gained 2.30 to close at $33.80, with Nexen Inc. finishing the day at $19.88, a $1.36 gain from Monday. Natural gas prices rose to $7.219 per million British thermal units, up 5.6 per cent, and a one-month high on colder weather and speculation rising crude prices could signal an easing of the global credit crunch. Energy stocks have dropped between 30 per cent and 60 per cent since July when oil hit $147 US a barrel. Analysts were split on whether the positive movement was another blip in a string of jerky ups and downs or a sign of stability. Nick Majendie, senior vice-president with Canaccord Capital Corp., said narrowing interest spreads indicate the markets are calming, adding he thinks they have reached at least a short-term bottom. "Oil was up six-odd bucks, which I would say is largely U. S. dollar related,"he said. "I think as long as the U. S. dollar is consolidating or falling back, which I think it's likely to do over the next while, I think that will stabilize commodity prices. With a marked global slowdown or recession ahead of us, commodity prices aren't going to go roaring up but at least it will put a bid under them." He said stock prices will likely begin to strengthen from "Depression-level multiples" as the United States election brings unity to America. --- Tuesday's Closing Market Numbers S&P/tsX composite index 10116.58, up 395.32 points dow Jones 9625.28 up 305.45 points nasdaq 1780.12 up 53.79 points Canadian dollar 86.87 cents Us, up 2.19 cents oil $70.53 Us a barrel up $6.62 gold $757.30 Us an ounce up $30.50 Chris Theal, analyst for Tristone Capital Corp., said he thinks the recovery in oil prices Tuesday isn't likely to be sustained. "I think it's going to be give and take until there's some tangible data that we've got (Organization of the Petroleum Exporting Countries quota) compliance. This market is going to struggle with uncertainty as to where demand is going to trough. . . . "So I think it's a bit of a give-take on the crude oil picture. I think gas is going to be a strong mover through the winter based on the magnitude of spending cuts we're seeing mostly from U. S. producers going into 2009 (due to the credit crunch)." Gold made its biggest gain since September, rising 4.2 per cent to hit $757.30 US an ounce. Investors were lined up buying gold stock, resulting in double digit gains for Agnico-Eagle Inc., Barrick Gold Corp. and Goldcorp Inc. "Over the past few weeks we have had a massive unwinding of risk, and as that has occurred, the U. S. dollar rallied against the euro and the Canadian dollar was falling," said David Burrows, president of Barometer Capital, commenting on Tuesday's gains. "Now, as the U. S. dollar backs off a little against the euro, some risk trades are being put back on the table. It looks to us like a retracement rally, and this has to be treated with suspicion," Michael Smedley, chief portfolio manager of Morgan Meighen&Associates, said the surge in Canadian equities was aided in part by fresh hope here and abroad of a "better America" now that the marathon U. S. election campaign has drawn to a close. Smedley discounted the idea that the index's return to above 10,000 points would have a positive psychological impact on investors, but he is encouraged by the fact Canada's main index continues to outpace the Dow Jones, its American counterpart. He sees no reason for the S&P/TSX composite to relinquish its leading position in the near future, but remains certain that volatile times for Canadian investors are still ahead. "I continue to exhibit caution, because I suspect for Canada, commodity prices will continue to be weak rather than strong while credit markets, despite efforts to the contrary, will remain tight in the near term and banking activity will likely remain subdued,"he said. Nine of 10 S&P/TSX sub-indexes climbed higher Tuesday with the S&P/TSX energy sub-index up 124.87 points to 2475.95 and the S&P/TSX materials sub-index, with a heavy weighting in mining stocks, climbing 180.11 points to 975.27. The TSX Venture composite index was up 39.68 points or 4.24 per cent, to 975.27 on the day.

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