The TSX finished higher for a third-straight session on Thursday as worries over European bank lending eased and U.S. economic data pointed to gradual economic improvements, sending financial and energy issues up sharply.

Financials were among the session's top performers, closing up 1.79 percent, on renewed confidence that the European Central Bank's cheap loans to euro zone banks would help ease funding strains.

I think it was sort of delayed response yesterday to some of the ECB stuff, said Paul Hand, managing director at RBC Capital Markets. It takes some of the systemic risk in the European banking system off the table, at least in the short term. So I think that's probably helped a little bit.

Royal Bank of Canada (RY.TO: Quote) was the index's top gainer, rising 3.85 percent to C$50.92, while Toronto-Dominion Bank (TD.TO: Quote) added 1.65 percent to C$74.61.

The Toronto Stock Index .GSPTSE closed up 122.95 points, or 1.05 percent, at 11,876.48, with nine of the 10 main sectors ending higher.

Energy issues also made big gains, closing 1.82 percent higher as oil prices rose on fears of supply disruptions from Iraq and Iran.

Suncor Energy (SU.TO: Quote) closed up 2.92 percent at C$28.90, while Canadian Natural Resources (CNQ.TO: Quote) rose 2.83 percent to C$37.79 and Cenovus Energy CVE.TO added 3.89 percent to C$33.07.

After starting the day in negative territory, materials issues rebounded to close up slightly. Potash Corp (POT.TO: Quote) led the gains, climbing 5.17 percent to C$43.51 as RBC Capital Markets boosted its rating on expectations that the fertilizer producer would outperform its peers.

But mining stocks weighed as lower gold prices weighed on the shares of the world's top gold producers. Barrick Gold (ABX.TO: Quote) was the TSX's biggest dragger, sliding 1.12 percent to C$46.95, while Goldcorp (G.TO: Quote) was down 1.34 percent to C$45.48.

With trade volumes trickling to a crawl ahead of the Christmas and New Year holidays, a batch of U.S. economic data pointing to gradual improvements in the world's largest economy spread some holiday cheer.

The number of Americans filing new claims for jobless benefits fell to a 3-1/2 year low, suggesting the U.S. labor market recovery was gaining speed, while U.S. consumer sentiment improved in December, hitting its highest level in six months as Americans felt better about the economy's prospects.

I think that the data that we've seen in the last little while indicates that the U.S. economy is actually starting to get a little traction, said Rick Hutcheon, president and chief operating officer of RKH Investments.

I don't think it's going to be booming economic growth, but if the United States can economically start to show some positive momentum, some positive traction, I think that's going to be seen as a good thing for the markets.