TORONTO (Bloomberg) - Canadian stocks rose for a second day, led by banks and commodity producers, after economic growth in Germany and France provided another sign the worst has passed in the world recession.

Royal Bank of Canada, the country's largest lender, gained 2.3 percent. Goldcorp Inc., the world's No.2 gold producer, jumped 2.7 percent. Suncor Energy Inc., Canada's biggest energy company, increased 1.7 percent.

"There's very little selling in this market," said Bob Decker, who helps oversee about C$4.5 billion as a portfolio manager at Aurion Capital Management in Toronto. "There's very little incentive to sell when you have the positive of an unattractive bond market and stocks are very inexpensive."

The Standard & Poor's/TSX Composite Index added 165.69 points, or 1.6 percent, to 10,825.56. After a 20 percent rally in the benchmark index this year, stocks on the S&P/TSX are still selling at 15.24 times profit over the past 12 months, compared with an average trailing price-to-earnings multiple over the past 10 years of 20.16.

The yield on the benchmark 10-year Canadian government note is 3.51 percent, compared with an average yield over the past 10 years of 4.65 percent.

The European Union's (EU) statistics office said gross domestic product in the euro zone contracted by 0.1 percent, seasonally adjusted, in the second quarter, as Germany and France unexpectedly returned to growth. The median estimate of economists surveyed by Bloomberg was a 0.5 percent contraction. The EU is Canada's largest export market besides the US.

Oil and gas stocks advanced as crude oil reached $72.21 a barrel before closing with a 0.5 percent increase to $70.52 a barrel in New York. Suncor gained 1.7 percent to C$36.45. Talisman Energy Inc. climbed 3.7 percent to C$17.55.

Gold increased 0.4 percent, rising for a third day as the U.S. dollar weakened, increasing the metal's appeal as an alternative investment.

Goldcorp rose 2.7 percent to C$39.52. Barrick Gold Corp., the world's biggest bullion producer, added 2.3 percent to C$37.29.

Royal Bank, the S&P/TSX's largest company by market value, increased 2.3 percent to C$50.71, contributing the most to the S&P/TSX's gain. Its biggest domestic competitor, Toronto- Dominion Bank, rose 1.7 percent to C$63.30.

Canadian stocks advanced even after an unexpected 0.1 percent decrease in US retail sales in July and an increase in the number of Americans filing first-time unemployment claims.

The US is Canada's biggest trade partner and bought 78 percent of Canada's exports last year, according to Statistics Canada.