CANADA STOCKS-TSX jumps on optimism over possible U.S. debt deal

Reuters

* TSX at 129.91 points, or 1.02 percent, at 12,859.25

* Potential for break in U.S. impasse boosts equities

* Canadian Natural Resources up 3 pct after Horizon update

By Alastair Sharp

TORONTO, Oct 10 (Reuters) - The main Canadian stock index

jumped in early trading on Thursday as investors bet U.S.

lawmakers would reach agreement to avoid a potentially

calamitous debt default.

The Toronto Stock Exchange's S&P/TSX composite index

gained more than 1 percent, matching similar jumps in

the three main U.S. indices, in a broad-based rally led by

financial and energy stocks.

House Republicans are considering agreeing to a short-term

increase in the government's borrowing authority, according to a

Republican leadership aide, keeping a possible default after

Oct. 17 at bay and buying time for negotiations on broader

policy measures.

A debt default by the United States, the world's biggest

borrower and Canada's top trading partner, would roil world

markets, raise borrowing costs, hurt the dollar and throw U.S.

and world economies into a recession.

"People feel the Republicans will cave, which I'm sure they

will, as we get closer and closer to the 17th," said Paul

Harris, portfolio manager at Avenue Investment Management.

"The Republicans are not going to want to be the party that

puts the United States into default."

A debt default by the United States, the world's biggest

borrower, would roil world markets, raise borrowing costs, hurt

the dollar and throw U.S. and world economies into a recession.

The Canadian index was up 129.91 points, or 1.02 percent, at

12,859.25 by mid-morning.

The single biggest positive impact came from Canadian

Natural Resources Ltd, which jumped 3 percent to

C$32.98 after saying its Horizon oil sands project would likely

be under budget.

Three banks were among the top five performers, with Royal

Bank of Canada up 1 percent at C$67.05, Toronto-Dominion

Bank gaining 0.9 percent at C$91.86, and Bank of Nova

Scotia adding 0.9 percent to C$59.48.

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