The Toronto Stock Exchange's S&P/TSX composite index ended up 145.18 points, or 0.7%, at 21,070.05 a day after reporting its biggest gain since February. On Monday, the index touched its lowest intraday level in more than two months at 20,382.33.

"We had the big sell off on Omicron and now people are starting to wonder if it is as bad as they say and will it slow down economies," said Norman Levine, managing director, Portfolio Management Corporation.

"They are coming to the realization that it's not as bad as originally thought."

A South African study suggested that those infected with Omicron were much less likely to end up in hospital than those with the Delta strain.

Upbeat U.S. consumer confidence data added to support for stocks, with Wall Street also rallying.

The Toronto market's energy sector rose 1.2% as oil prices climbed. U.S. crude oil futures settled 2.3% higher at $72.76 a barrel after a larger-than-expected drawdown in U.S. inventories.

Technology stocks advanced 0.7%, helped by 11.3% jump in Dye & Durham Ltd after the IT service provider said it will acquire Australia-listed Link Administration Holdings Ltd for about C$3.2 billion ($2.48 billion).

The materials group, which includes precious and base metals miners and fertilizer companies, added 1.0%, while the heavily-weighed financials group ended 0.8% higher.

(Reporting by Fergal Smith; Additional reporting by Amal S in Bengaluru; Editing by Alistair Bell)

By Fergal Smith