Toronto stock market was higher Tuesday as a $1-trillion (U.S.) plan to contain Europe’s debt crisis persuaded investors to send shares higher

The Toronto stock market was higher Tuesday as a $1-trillion (U.S.) plan to contain Europe’s debt crisis persuaded investors to send shares higher for a second day.

But there was an underlying mood of caution about how much long-term relief the package will provide and nervous investors looking for safety pushed gold to a record high close. Meanwhile, a report that China’s inflation is rising helped chip away at base metal stocks over fears of a possible slowdown in the Chinese economy.

The S&P/TSX composite index closed up 52.71 points at 12,000.61 while the TSX Venture Exchange added 21.82 points to 1,612.58.

The TSX global gold index was the leading advancer in Toronto, as the June bullion contract in New York rose $19.50 to a record high close of $1,220.30 (U.S.) an ounce. At one point it hit $1,225.30, close to its all-time intraday record of $1,226.40 an ounce.

“Bullion is rising because there is still the broader economic concerns out there related to all the issues that the European bailout package was addressing,” said Steve Uzielli, portfolio manager and director at ScotiaMcLeod Equity Advisory.

“It’s provided a temporary Band-Aid for now but...if you follow through the logic of this bailout package, the only way it works is if these austerity measures are put into place and that means significant cutbacks in government spending and it effectively forces those European countries back into recession.”

Barrick Gold Corp. jumped $1.92 to $46.87 while Goldcorp Inc. ran ahead $2.61 to $47.21.

Stock markets rose sharply Monday after the European Union unveiled its massive financial support package to defend the euro and prevent the debt crisis that started in Greece from spreading to other big debtor countries like Portugal and Spain.

But investors also realize that these heavily indebted countries face huge challenges and still have to significantly scale back spending, possibly stalling any European economic recovery and dragging down a global rebound.

The Canadian dollar moved up 0.24 of a cent to 97.87 cents (U.S.), while the euro weakened, trading at $1.2685 (U.S.), down from $1.2775 (U.S.) late Monday.

The utilities sector was also supportive as investors found defensive stocks attractive, rising almost one per cent as Emera Inc. gained 34 cents to $24.55 while Fortis Inc. was up 28 cents at $27.36.

The Toronto energy sector was 0.6 per cent lower amid volatile crude prices. The June crude contract on the New York Mercantile Exchange lost 43 cents to $76.37 (U.S.) a barrel after earlier going as high as $77.68. Suncor Inc. shed 70 cents to $31.94, while Canadian Natural Resources lost 87 cents to $73.11.

Also having a depressing effect on commodity stocks Tuesday was a report that showed inflation in China accelerated last month. Continued high inflation might force the Chinese government to further clamp down on credit to prevent speculative bubbles. China might eventually be forced to raise interest rates to fight inflation, which could slow the economy and imports.

Such a scenario was particularly bad news for the TSX, which is heavily weighted in resource stocks which have benefited from the strong Chinese economy.

“That’s another factor on our list of things to be concerned about in terms of the global economic recovery,” said Uzielli.

“A lot of it does hinge on expectations for China, so if those expectations get curbed, then it has implications down the line in terms of demand for commodities and therefore commodity prices. So it filters all the way down.”

The July copper contract on the Nymex lost four cents to $3.19 (U.S.) a pound and the base metals sector backed off 4.6 per cent. Teck Resources lost $3.07 to $36.46 while Ivanhoe Mines dropped $1.05 to $15.49.

The consumer staples sector got a boost after George Weston Ltd., which owns a majority stake in grocer Loblaw Cos., reported Tuesday that it had $42 million in net earnings, or 25 cents per share, in the first quarter. Revenue came in at $7.1 billion. A year earlier, Weston’s continuing operations posted a $27- million loss. Its shares gained 33 cents to $74.

New York markets were weak as the Dow Jones industrials began the day in the red, jumped almost 100 points, then finished 36.88 points lower at 10,748.26.

The Nasdaq composite index added 0.64 of a point to 2,375.31, while the S&P 500 index slipped 3.94 points to 1,155.79.

In other corporate news, Toyota cruised back into the black in the latest quarter, handing in a profit of $1.2 billion (U.S.), compared with a $8.27-billion (U.S.) loss the year before. Toyota is forecasting even better results for the fiscal year through March 2011, projecting annual profit to rise 48 per cent to $3.3 billion (U.S.).

Whether the world’s biggest automaker can continue its recovery rests, in part, on salvaging its reputation after recalling more than eight million cars worldwide for faulty gas pedals, a braking software glitch, faulty floor mats and other defects.

In Canada, Ivanhoe Energy Inc. shares were down 17 cents at $2.73 after the company reported a first-quarter loss of $2.6 million (U.S.), reduced from a year-ago loss of $12.3 million, as oil revenue fell due to a reduction of the oil and gas producer’s working interest in China-based production.

First Quantum Minerals Ltd. said Monday it earned $146.2 million (U.S.) or $1.81 per share for the quarter ended March 31 compared with a profit of $10.9 million (U.S.) or 16 cents per share a year ago. Revenue totalled $562.8 million (U.S.), up from $261 million but its shares still declined $3.45 to C$70.01.

Pan American Silver Corp. shares gained 91 cents to as the company more than doubled its quarterly profit compared with a year ago as revenue grew nearly 90 per cent. The silver miner said Monday that it earned $19.1 million (U.S.) or 18 cents per share for the quarter ended March 31 compared with a profit of $6.6 million or eight cents per share in the comparable year-earlier quarter.

Northgate Minerals Corp. shares gained 24 cents to $3.45 after reporting earnings of $4.9 million (U.S.) or two cents per share in the first quarter, compared with $21.4 million or eight cents per share a year ago. Revenue was $125.3 million, up slightly from $123.8 million in the same period of 2009.

Canfor Corp. said Monday it will restart operations at its sawmill in Quesnel, B.C., in June because of demand from China. The lumber producer said it will recall approximately 155 employees and its shares were ahead 11 cents at $10.41.