TORONTO (Bloomberg) - Canadian stocks gained for a second day as oil and metals prices rallied on the prospect of a bailout for Ireland and Walter Energy Inc. offered to buy Vancouver-based Western Coal Corp.

Suncor Energy Inc., Canada's biggest oil and gas producer, jumped 2.5 percent as oil rebounded from a four-week low. Western Coal, which mines in Canada and the US, surged 46 percent after Tampa, Florida-based Walter Energy offered a bid it valued at C$3.3 billion ($3.24 billion). Royal Bank of Canada, the country's largest lender by assets, rose one percent as the S&P/TSX Banks Index climbed the most in six weeks.

The Standard & Poor's/TSX Composite Index increased 205.18 points, or 1.6 percent, to 12,863.01 as of 11.44am in Toronto.

"When Europe gets in trouble, anybody selling into Europe, whether Canadians selling oil or Americans selling software, will all be in trouble," said Paul Ma, who manages C$500 million as a money manager at McLean & Partners in Calgary. "When we hear of a bailout, everything sort of gets calmed down, and hopefully there is enough economic progress in all the European countries to generate enough tax revenue to get themselves out of trouble."

The index has advanced for two straight days, after declining 3.5 percent since November 8 on concerns over European budget deficits and the possibility of further tightening of credit by China's central bank.

The euro increased as much as one percent, the most since November 3, against the US dollar yesterday after Irish Finance Minister Brian Lenihan said the government is prepared to accept an aid package for its banks after talks with the European Union and International Monetary Fund conclude.

Oil and raw materials climbed as the US dollar decreased.

Crude futures rose for the first day since November 10. Suncor gained 2.5 percent to C$34.44, ending a five-day streak of losses. Canadian Natural Resources Ltd., the country's second- largest energy company by market value, advanced 3.4 percent to C$40.12.

Celtic Exploration Ltd., which produces oil and gas in Alberta, increased 6.2 percent to C$16.52 after Brian Kristjansen, an analyst at Canaccord Financial Inc., raised his rating on the shares to "buy" from "hold". Yesterday, Celtic soared 19 percent after announcing drilling results.