TORONTO - The Toronto stock market closed higher for a second day Tuesday as investors breathed a sigh of relief that a solution to the European debt crisis may finally be at hand, easing concerns that demand for Canadian commodities will take a hit.

However, the S&P/TSX composite index closed well off earlier highs but still closed up 113.91 points to 11,821.09 on top of a 244-point runup Monday while the junior TSX Venture Exchange was ahead 43.28 points to 1,570.43.

The showing took some of the sting out of last week's 925-point plunge, which took left the TSX about 20 per cent below its highs for the year.

The TSX gained as much as 351 points during the morning before losing momentum late in the session as some analysts cautioned investors that they shouldn't read too much into the strong gains of the past two days.

"I wouldn't count on the European authorities necessarily getting religion any time soon -- they have been behind the eight ball, I think you can continue to expect them to remain behind the eight ball," said John O'Connell, CEO of Davis Rea Ltd.

"The fact of the matter is, political problems persist and you have to get 17 countries to agree (on raising the bailout fund) and I don't think you can accomplish that easily."

Investors have been nervous that a debt default by the Greek government could push other countries over the edge and severely damage European banks.

But despite some relief over Europe, there is still nervousness that the global economy is slipping back into recession.

The Canadian dollar was up sharply as a greater appetite for risk weakened the U.S. dollar and pushed commodity prices higher. The currency rose 0.75 to 98 cents US.

New York markets also ran ahead on top of big gains on Monday, after European ministers told a meeting of global finance leaders in Washington over the weekend that they would take bolder and more decisive steps to pull Greece back from the brink of bankruptcy.

Reports said that officials were working on a plan to recapitalize banks in the eurozone, using leverage to bolster the European Financial Stability Facility, the eurozone's bailout fund.

However, U.S. indexes also closed well below the session highs as the Dow Jones industrials closed up 146.83 points to 11,190.69. The Nasdaq composite index rose 30.14 points to 2,546.83 and the S&P 500 index gained 12.43 points to 1,175.38.

There was also relief after Greece's finance minister said Tuesday that the country will receive the next batch of bailout loans amounting to euro8 billion in time to avoid a potentially disastrous default.

Hopes that European officials can get a grip on the government debt crisis improved demand prospects and pushed commodity prices up sharply.

The energy sector climbed 1.64 per cent as the November crude contract on the New York Mercantile Exchange advanced $4.21 to US$84.45 a barrel. Suncor Energy (TSX:SU) climbed 72 cents to $28.38 while Canadian Natural Resources (TSX:CNQ) rose 22 cents to $31.77.

The base metals sector continued to come back from a 23 per cent plunge last week. It was up 5.28 per cent Tuesday while the December copper contract on the Nymex closed up 16 cents to US$3.44. Teck Resources (TSX:TCK.B) jumped 85 cents to $32.06 while First Quantum Minerals (TSX:FM) advanced $1.45 to $16.40.

Global miner Rio Tinto PLC has bought another 3.7 million shares of Ivanhoe Mines Ltd. raising its stake in the Vancouver-based gold and copper miner (TSX:IVN) to 49 per cent, the maximum level allowed under a deal between the two companies.

On Monday, Ivanhoe shares closed at their lowest level in more than a year as the company fought back against an attempt by the Mongolian government to take a bigger stake in its massive Oyu Tolgoi copper-and-gold project. But on Tuesday, its shares jumped $2.42 or 16 per cent to $17.42.

Optimism over the European debt situation also powered financials higher, up 0.67 per cent as Scotiabank (TSX:BNS) was ahead 67 cents to $52.97 and National Bank (TSX:TD) gained $1.82 to $70.02.

The capital markets division of Royal Bank (TSX:RY) has agreed to pay US$30.4 million to settle charges by the U.S. Securities and Exchange Commission over allegations it sold unsuitable investments to five Wisconsin school districts. Its shares rose 10 cents to $48.08.

Research In Motion Ltd. (TSX:RIM) was also supportive, up 81 cents to $23.15 amid speculation that activist investor Carl Icahn had taken a stake in the BlackBerry maker.

The gold sector lost early gains and turned negative by the close even as the December bullion contract gained $57.70 to US$1,652.50 an ounce after four losing sessions sent prices tumbling almost 12 per cent. Barrick Gold Corp. (TSX:ABX) was off 38 cents to $48.56.

In other corporate news, Silver Standard Resources Inc. (TSX:SSO) said Tuesday its revising its estimates after the Pirquitas mill in Argentina was shut down due to a gearbox failure. The Vancouver-based miner said silver guidance is being reduced to 7.3 million ounces to 7.6 million ounces for 2011. In June, Silver Standard estimated silver production of 8.5 million ounces for the year. Its shares were down 51 cents to $21.43.

The board of Clearwater Seafoods Income Fund (TSX:CLR.UN) board has formally rejected a takeover bid from rival Cooke Aquaculture takeover bid as too low. The Halifax company said Tuesday it believes the $3.50 per unit offer -- valuing Clearwater at about $97.1 million -- "does not adequately reflect the value of the fund and its future prospects." Clearwater units dipped one cent to $2.46.