Oil rallied above $42 (U.S.) a barrel, helping boost optimism on global growth and lifting stocks and commodity prices worldwide.
Canadian stocks rose a third day as crude extended gains from a four-month high, while Bombardier Inc. climbed on more firm orders for its C Series jet aircraft.
The Standard & Poor's/TSX Composite Index rose 1.2 per cent, or 158.66 points, to 13,581.42 in Toronto, extending gains to 2.3 per cent during a three-day winning streak. The S&P/TSX remains one of the best-performing developed markets in the world this year with a 3.8 percent gain.
Canadian equities advanced with commodities prices, as crude extended a rally after Interfax reported Russia and Saudi Arabia reached a consensus on freezing oil output. Gold held near a three-week high, buoyed by a dollar that trades near a June 2015 low.
The resource-dominant S&P/TSX remains tied to commodities prices, as a first-quarter rally fueled by a resurgence in crude and gold prices has found some footing after stumbling to start the second quarter. Energy producers added 5.1 per cent as a group, the most in the S&P/TSX as five of 10 industries advanced.
Resource producers have been among the top-performing industries in Canada this year, led by a 28-per-cent resurgence among raw-materials stocks. Gold prices have soared 19 per cent as investors scale back projections for U.S. rate increases. The Canadian benchmark now trades at 21.5 times earnings, about 15 per cent higher than the 18.6 times earnings valuation of the Standard & Poor's 500 Index, according to data compiled by Bloomberg.
Bombardier added 6.3 per cent, after three straight days of no change, after the struggling aerospace manufacturer said Latvia's flag carrier airBaltic converted its remaining seven option aircraft to a firm order. This latest order brings the Latvian carrier's total firm orders to 20 CS300 aircraft.
The C Series is "critical" to the survival of Bombardier's aircraft business, George Ferguson, an industry analyst with Bloomberg Intelligence, said in a note. Mr. Ferguson estimates Bombardier needs more than 1,000 C Series orders for success.
U.S. stocks also gained on Tuesday, led by surging energy shares that were buttressed by rising oil prices, as investors scooped up equities with an expected tepid corporate earnings season under way.
The Dow Jones industrial average rose 165.12 points, or 0.94 per cent, to 17,721.53, the S&P 500 gained 19.73 points, or 0.97 per cent, to 2,061.72 and the Nasdaq Composite added 38.69 points, or 0.8 per cent, to 4,872.09
Energy producers surged 2.7 per cent. Chesapeake Energy Corp. surged the most on record after pledging assets to maintain access to financing. Alcoa Inc. slid 3.4 per cent after the largest U.S. aluminum producer cut its forecast for global demand. Juniper Networks Inc. plunged 7.5 per cent after sales missed forecasts, dragging the semiconductor industry lower.
All 10 main S&P 500 groups advanced Tuesday, with energy and financial shares leading the way. JPMorgan Chase & Co. and Citigroup Inc. are among companies that report corporate results this week.
"Oil prices have really been the driver of sentiment, with a high positive correlation," said David Spika, global investment strategist for GuideStone Capital Management. "There's continued positive sentiment that is a function of a more dovish Fed as well as continued oil price strength and weakness in the dollar."
The rally in crude is overshadowing the start of earnings season that is forecast to be the worst since the financial crisis, with analysts projecting first-quarter profits shrank 10 per cent - including a 20-per-cent decline for banks - compared with earlier estimates for flat growth.
"We don't have strong revenue growth - that's what we heard from Alcoa," said Mr. Spika. "Until we have that, particularly with wage pressure, it's hard to justify a move higher in the market. Investors are whistling past the graveyard and not focusing on the key issue. It's a show me market, and we need earnings to push it forward from here."
After a tumultuous start to the year that saw the S&P 500 tumble as much as 11 per cent, U.S. equities are now almost unchanged amid optimism that central-bank policies will remain supportive of growth. Traders are now pricing in zero chances of an interest-rate increase in April, and the first month with at least even odds for a boost has been pushed to February 2017.
Still, a rally that pushed the S&P 500 up as much as 13 per cent from a Feb. 11 low is fading as reasons for additional stock gains grow thin, with stock valuations well above the five-year average.
Crude climbed to the highest level in more than four months as Saudi Arabia and Russia were seen agreeing on a potential production freeze deal.
Oil rose 4.5 per cent in New York. Saudi Arabia and Russia have reached a consensus on an output freeze, Interfax said Tuesday, citing an unidentified "informed diplomatic source" in Doha. "There is hope" that an agreement can be reached regardless of Iran's position, said Dmitry Peskov, the Kremlin's press secretary. OPEC members will meet with other major producers, including Russia, to discuss capping production in the Qatari capital on April 17.
"The market has clearly shifted to the view that an agreement will be reached," said Mike Wittner, head of oil markets at Societe Generale SA in New York. "There are talks going on behind the scenes, and occasionally we get bits of information. People are going to trade on these bits of news."
Oil has rebounded after falling to the lowest level in more than 12 years amid signs a global glut will ease as U.S. output declines. Saudi Arabia, the biggest OPEC producer, said previously it would agree to a cap only if it's joined by other suppliers including Iran, while Kuwait said a deal can be done without Tehran's support. While Iran will attend the talks, it has ruled out limiting supply as it restores exports after sanctions were lifted in January.
West Texas Intermediate for May delivery rose $1.81 to settle at $42.17 a barrel on the New York Mercantile Exchange. It was the highest settlement price since Nov. 25.
Brent for June settlement advanced $1.86, or 4.3 per cent, to $44.69 a barrel on the London-based ICE Futures Europe exchange. It was the the highest close since Nov. 27. The global benchmark ended the session at a $1.19 premium to WTI for June delivery.
"We're going to see a lot of back and forth whipsawing the market ahead of the meeting," said Matt Sallee, who helps manage $13.5-billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kans. "I wouldn't be surprised if prices fall Monday."
Russian Energy Minister Alexander Novak briefed Russian President Vladimir Putin on latest talks with Saudi Arabia, Mr. Peskov said, without saying when talks took place. Mr. Novak spoke to Saudi Petroleum Minister Ali al-Naimi by phone on Tuesday to discuss prospects for a deal on the freeze at the Doha meeting, a person with direct knowledge of the matter said.
The likely outcome on April 17 will be "a soft agreement which would not really do anything to fundamentals," Jeff Currie, head of commodities research at Goldman Sachs, said in a Bloomberg Television interview. Anything stronger is "not in anybody's interest right now," Mr. Currie said
The Organization of Petroleum Exporting Countries' next scheduled meeting is on June 2 in Vienna.
"The markets could be thinking freeze in April, maybe cut in June," Societe Generale's Mr. Wittner said.
Prices climbed earlier as forecasts for lower U.S. shale production signaled the global glut will slowly diminish. Output from U.S. shale formations will drop to 4.84 million barrels a day in May, the lowest in almost two years, a report Monday from the Energy Information Administration showed. The EIA cut its 2016 U.S. oil production forecast to 8.6 million barrels a day from 8.67 million forecast in March, according to its Short-Term Energy Outlook on Tuesday.
Copper recovered for a second day from its biggest weekly loss in three months, rising 2.2 per cent to $4,766.5 a metric ton. Aluminum rose 1.6 per cent to $1,533 a ton.
Silver in the spot market climbed 1.8 per cent, extending the biggest gain in six months.
The FTSEurofirst index of 300 major European companies rose 0.6 per cent, led by energy names. MSCI's gauge of stocks across the globe added 0.6 per cent, its fourth gain in the past five sessions.
Earlier, Japanese shares rose 1.1 per cent after a rally in the yen against the dollar stalled, lifting shares of exporters.
The U.S. dollar also strengthened against the euro for only the third session in the last 12. The dollar index ticked up 0.2 per cent, its strongest session in three weeks.
The dollar has been weak of late as investors have pulled back from riskier assets and closed out trades that involved borrowing in low-yielding yen to buy assets in the U.S. and other markets.
Currencies of commodity-based economies like Canada also rose. Against the greenback, the loonie hit its strongest level in nine months.
"Oil is now more than 50 per cent stronger than it was at its low in February. That's boosting general sentiment overall and with that we're seeing a rally in commodity currencies such as the Canadian dollar," said John Doyle, director of markets at Tempus Consulting in Washington.
With files from Reuters