TORONTO - The Toronto stock market kicked off 2010 trading Monday with a solid advance as encouraging manufacturing data from the U.S. and China sent commodity prices higher.

The S&P/TSX composite index closed up 120.79 points to 11,866.9 as the Institute for Supply Management's U.S. manufacturing index rose to a better-than-expected 55.9 last month from 53.6 in November. A figure above 50 indicates expansion and the bigger the difference, the faster the expansion.

The good news boosted commodity prices amid hope that a broad-based economic recovery is underway. Higher commodity prices, in turn, sent the Canadian dollar almost one cent higher, extending the loonie's sharp rise from the 82.1-cent level where it started 2009.

In its first day of trading this year, the Canadian dollar jumped 0.87 of a cent to 96.02 cents US.

Other data showed China's manufacturing sector expanded at its fastest rate in 20 months in December.

The monthly purchasing managers' index -- a key gauge of activity for the 16 countries that use the euro -- rose to a 21-month high of 51.6, while the equivalent survey for Britain rose to a 25-month high of 54.1.

"I think you have all the pieces," said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis.

"The news is better than expected on the economy and certainly in the U.S. and China, which are both global growth drivers. And I think that's what everybody is watching, so we have commodities higher and no surprise the TSX is up as well."

The economic reports follow an impressive end to the 2009 trading year that saw the main Toronto index up 31 per cent -- its best one-year gain since 1979. The Dow Jones industrials ran ahead 19 per cent, the tech-heavy Nasdaq 44 per cent and the S&P 500 index jumped 23 per cent as investors hope a solid economic recovery is taking place.

The base metals sector advanced 4.29 per cent as Teck Resources (TSX:TCK.B) ran up $2.19 to $39.01 while Western Coal Corp. (TSX:WTN) gained 49 cents or 15.03 per cent to $3.75.

The March copper contract was up six cents to US$3.41 as workers at Chile's largest copper mine went on strike after rejecting a last-minute pay offer from the mining company Codelco, which is the world's largest copper producer. The Chuquicamata mine is one of the world's largest open-pit operations and it produces about half of Codelco's output.

Codelco as a whole produces about four per cent of the world's copper.

The gold sector gained 2.37 per cent as the February gold contract on the Nymex moved ahead $22.10 to US$1,118.30. Barrick Gold Corp. (TSX:ABX) was up 62 cents to $42.08 while Goldcorp Inc. (TSX:G) rose $1.14 to $42.49.

Iamgold Corp. (TSX:IMG) shares gained 32 cents to $16.83 as it said that Joseph Conway, its long-time president and chief executive officer, will be leaving the company effective Jan. 15. Peter Jones, a director of the company, will be acting CEO on interim basis.

TSX energy stocks were supportive as the weaker greenback and bullish economic data pushed oil prices past the US$80 a barrel level for the first time since early November.

The February crude contract on the New York Mercantile Exchange was $2.15 higher to US$81.51 a barrel -- almost double the price of a year ago. The energy sector rose 2.29 per cent as Suncor Inc. (TSX:SU) improved $1.09 to $38.30 while EnCana Corp. (TSX:ECA) climbed $1.60 to $35.71.

There was also deal-making in the oilpatch as Western Canada-based, light oil focused PetroBakken Energy Ltd. (TSX:PBN) agreed to buy Berens Energy Ltd. (TSX:BEN) for $336 million, including debt. PetroBakken shares rose 72 cents to $33.05 while Berens shares surged 64 cents or 31.53 per cent to $2.67.

The tech sector was weakest, down 0.89 per cent with Research In Motion Ltd. (TSX:RIM) down $2.29 at $68.74.

The telecom sector was also weak, down 0.49 per cent with Rogers Communications (TSX:RCI.B) down 95 cents to $31.74.

The TSX Venture Exchange gained 22.41 points to 1,543.13.

Reports of stronger manufacturing activity sent New York markets sharply higher amid other economic data showing that construction activity fell for a seventh consecutive month as spending on both residential and commercial projects declined.

The Dow Jones industrial average gained 155.91 points to 10,583.96.

The Nasdaq composite index climbed 39.27 points to 2,308.42 and the S&P 500 index was 17.89 points higher to 1,132.99.

In other corporate news, Swiss drug maker Novartis AG said Monday it plans to take over Alcon Inc. by paying $38.5 billion for the 77 per cent stake it does not already own. The deal would make it one of the biggest players in the global market for eye-care products.

Petrominerales Ltd. (TSX:PMG) says its Candelilla-1 well in Colombia has begun production, but output has been restricted temporarily due to transportation limitations. The company, which is 67 per cent owned by Petrobank Energy and Resources Ltd. (TSX:PBG), said the well began production at 11,500 barrels of oil per day. Petrominerales shares climbed $3.20 or 17.02 per cent to $22 while Petrobank shares rose $2.69 to $53.90.

Shares in Manulife Financial Corp. (TSX:MFC) gained 62 cents to $19.95 even as Standard & Poor's cut the insurer's rating from double-A-minus to single-A-plus. S&P had earlier said it would do so once the insurer completed a reorganization of its U.S. subsidiary. The agency believes the reorganization could increase the risk that Manulife won't have the cash flow it needs in times of extreme stress.