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CANADA STOCKS-TSX advances on U.S. debt hopes, Talisman

* TSX rises 26.51 points, or 0.21 percent, to 12,815.76

* Eight of 10 main index sectors advance

* Talisman gains on Icahn stake

* Manitoba Telecom falls after government rejects unit sale

By John Tilak

TORONTO, Oct 8 (Reuters) - Canada's main stock index climbed

on Tuesday, boosted by hopes of a resolution to the U.S. debt

crisis and a rise in Talisman Energy Inc after activist

investor Carl Icahn disclosed a stake in the company.

Talisman shares jumped in early trade before paring some of

those gains to trade up about 1.5 percent. Late on Monday, Icahn

said he had purchased about 61 million shares of the

underperforming oil producer and may seek a seat on the

company's board.

Investors appeared more optimistic after signals of progress

emerged in the U.S. fiscal standoff, from both Congress and the

White House, with President Barack Obama saying he would accept

a short-term increase in the country's borrowing authority to

avoid a default.

The Toronto market also appeared less worried about the debt

crisis, extending its gains to a third straight session.

The market is not pricing in a worst-case scenario and is

seeing a solution somewhat soon, but that's a reasonable

expectation, said David Cockfield, managing director and

portfolio manager at Northland Wealth Management.

"Nobody is totally panicked," he said. "In the meantime, you

sit on your hands."

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

was up 26.51 points, or 0.21 percent, at 12,815.76.

Cockfield expects the benchmark index to reach 13,500 by the

end of the year.

Eight of the 10 main sectors on the index were higher on


Financials, the index's most heavily weighted sector,

climbed 0.2 percent. Royal Bank of Canada, the country's

biggest lender, gained 0.2 percent to C$66.64.

Energy shares benefited from rising oil prices. Canadian

Natural Resources Ltd added 1.2 percent to C$32.55,

having the biggest positive influence on the index. Encana Corp

climbed 1.1 percent to C$17.86, and Talisman was up at


With the price of bullion rising, shares of gold miners

climbed. Goldcorp Inc rose 1 percent to C$26.32.

But shares of Manitoba Telecom Services Inc slipped

7.6 percent after the company said late on Monday the Canadian

government rejected the proposed sale of its Allstream division

to Accelero Capital Holdings due to "unspecified national

security concerns."