Suncor Energy Inc., Canada's biggest oil and gas producer, increased 1.7 percent as crude futures advanced after Japan said its economy shrank less than most economists had forecast. Kinross Gold Corp., the country's third-largest gold producer, rallied 4.1 percent after an analyst at National Bank of Canada boosted his rating on the shares. BlackBerry maker Research In Motion Ltd. surged 9.2 percent after Google said it will buy Motorola Mobility Holdings Inc. for $12.5 billion.
The Standard & Poor's/TSX Composite Index rose 141.41 points, or 1.1 percent, to 12,683.61.
"The M&A news is helping to drive the gains, plus, over the weekend you didn't see anything all that scary," Brian Huen, a managing partner at Red Sky Capital Management Ltd. in Toronto, said in a telephone interview, referring to mergers and acquisitions. Red Sky oversees C$54 million ($55 million).
The S&P/TSX gained the most since July 2010 last week as gold touched a record high and the U.S. reported a decline in initial jobless claims. The index lost 3.1 percent this month through Aug. 12, the least among developed-market stock benchmarks.
Japan's gross domestic product fell at an annualized rate of 1.3 percent in the second quarter, less than all but one of 25 economists' forecasts in a Bloomberg survey.
Suncor, Canadian Natural
S&P/TSX energy companies advanced for a fifth day as crude increased 2.9 percent. Suncor climbed 1.7 percent to C$32.43. Canadian Natural Resources Ltd., the country's second-largest energy company by market value, rose 1.5 percent to C$36.88. Ivanhoe Energy Inc., an oil-sands developer with projects in Canada and Ecuador, jumped 16 percent, the most since February 2010, to C$1.63.
Gold stocks gained with the metal as the U.S. dollar slipped as much as 1.1 percent against a basket of world currencies.
Barrick Gold Corp., the world's largest gold producer, advanced 1.2 percent to C$49.71. Goldcorp Inc., the world's second-biggest gold-mining company by market value, increased 1.2 percent to C$50.05. North American Palladium Ltd., which mines in Ontario, soared 8.1 percent to C$3.72.
Kinross climbed 4.1 percent to C$16.12 after Paolo Lostritto, an analyst at National Bank, raised his rating on the shares to "outperform" from "sector perform." The analyst cited growth in production and cash flow in a note to clients.
NGEx Resources Inc., which explores for copper and gold, surged 15 percent to C$3.60 after saying it will drill for potash in Eritrea. Copper and molybdenum producer Mercator Minerals Ltd. jumped 8.7 percent to C$2.62 before releasing second-quarter financial results.
Thirty of 43 S&P/TSX financial companies rose. Manulife Financial Corp., North America's fourth-largest insurer, gained 4.2 percent to C$13.73. Royal Bank of Canada, the country's largest lender by assets, increased 0.9 percent to C$51.65.
Toronto-Dominion Bank, Royal Bank's biggest domestic rival, climbed 1.3 percent to C$76.88 after agreeing to buy Bank of America Corp.'s Canadian credit-card business. TD will pay a "modest premium" for the C$8.5 billion ($8.6 billion) unit, the lender said in a statement.