* TSX up 1.3 pct, or 164.08 points, to 12,894.41
* Potential for break in U.S. impasse boosts equities
* Canadian Natural Resources up more than 4 pct
By Leah Schnurr
TORONTO, Oct 10 (Reuters) - The main Canadian stock index
racked up its best day in three months on Thursday as investors
were encouraged by signs U.S. lawmakers were making progress in
negotiations to raise the debt ceiling.
U.S. politicians are locked in a budget stalemate that has
resulted in a partial government shutdown now in its tenth day.
The impasse is bringing lawmakers closer to a separate
mid-October deadline to raise the debt ceiling to avoid a
potential default that would roil world markets.
Republicans in the House of Representatives on Thursday put
forward a plan that would delay that deadline by roughly six
weeks, giving the government, and markets, some breathing room.
"The debt issue was a very good excuse to stay on the
sidelines, but now that there's some hope that the situation
will be resolved, we're seeing people get back into the market
in a hurry," said Elvis Picardo, strategist and vice president
of research at Global Securities in Vancouver.
"You're now down to the final quarter of the year, so
there's a ton of money that needs to be put to work."
The Toronto Stock Exchange's S&P/TSX composite index
jumped 1.3 percent, or 164.08 points, to 12,894.41. It
was the biggest increase since early July, though it lagged the
equities rally south of the border where the three major indexes
climbed more than 2 percent.
Canadian Natural Resources was one of the biggest
boosts of the day after the oil explorer and producer reported
stronger-than-expected cash flow. The stock climbed 4.5 percent
Shares of BlackBerry rose 0.6 percent to C$8.49
after co-founder Mike Lazaridis increased his stake and was
considering buying the entire company.
Three banks were among the top five performers, with Royal
Bank of Canada up 1.9 percent at C$67.69,
Toronto-Dominion Bank gaining 1.3 percent at C$92.30,
and Bank of Nova Scotia adding 1.3 percent to C$59.72.