TORONTO - North American stock markets roared back to life Tuesday on renewed hopes a massive Wall Street bailout plan will eventually succeed, even as there were more warnings about the Canadian economy and another blow to the troubled manufacturing sector in Ontario.

The Toronto stock market gained back almost 470 points and Dow Jones recovered 485 points, as both markets snapped back from massive record losses the day before that had wiped out more than $108 billion in value off the Canadian market and US$1.2 trillion on Wall Street.

"We've got the return of at least some optimism about what might happen in terms of a bailout plan in the U.S.," said Kate Warne, Canadian market specialist at the Edward Jones brokerage.

"Investors are rethinking how bad this (market) really is."

Bargain hunting was behind some of the yo-yo trading Tuesday as investors bought stocks in anticipation that the U.S. Congress will eventually salvage a US$700 billion rescue plan for the financial sector that was defeated Monday in the House of Representatives.

But even if a bank bailout goes through, the general economy is getting worse on both sides of the border, with warnings of weaker consumer spending and rising unemployment ahead.

Meanwhile, a major layoff announced Tuesday of 500 workers in southwestern Ontario, a region already badly hit by plant shutdowns, created more fears about the state of the economy as the main political parties campaign for the Oct. 14 federal election.

Trying to calm down jittery Canadians, Finance Minister Jim Flaherty said Canada is in much better shape to weather the economic volatility than the United States. South of the border, toxic sub-prime mortages to risky borrowers led to a plunge in real estate prices and hundreds of billions of dollars of failed mortgage debt, which is at the heart of the Wall Street financial crisis.

"Canada is not an island but we do enter into this turmoil from a position of strength," Flaherty said in an interview with BNN, a business news TV channel based in Toronto.

"The conditions in our economy are dramatically different from the conditions in the United States. We do not have a housing bubble in Canada, and the percentage of mortgage to value in Canada is something like 30 per cent, compared with 55 per cent in the United States.

"We do not have a significant number of sub-prime mortgages in this country and our fiscal fundamentals are dramtically different."

On Bay Street, higher oil prices also helped the commodities-focused Canadian market as crude surpassed US$100 a barrel and recovered nearly half its Monday losses.