Markets are making gains Tuesday as investors drift back to work from summer vacations. At midday, the S&P/TSX composite index is 33 points higher at 7,543.

Volume is decent at 106 million shares, with buying trumping the selling by an 11:8 margin. Market breadth is almost even, with winners barely edging out losers.

Stocks are making gains ahead of an expected rate cut by the Bank of Canada tomorrow. This has the dollar down, and exporters looking up.

Most of the TSX’s groups are modestly higher at midday, led by a 1.3% gain in telecoms. Consumer stocks, industrials and diversified names are all stronger too. Real estate is the only group showing any convincing weakness.

BCE is leading the way higher despite news that it is being sued. The telecoms giant is up 1.2% following the word that it is being sued by the giant pension fund Caisse de depot et placement du Quebec over the terms of an offering in Bell Canada International last year. A class action has also been filed.

The banks are stronger once again, led by a 0.8% gain in Scotiabank. Royal Bank and Bank of Montreal are up, too.

Old economy names are also rallying. Canadian Superior Energy is up, as is Falconbridge, Cambior, Gabriel Resources, Queenstake Resources and Meridian Gold. Although, EnCana is down, as is Nuvista Energy.

Shoppers Drug Mart is leading the retailing stocks, with a 2.7% gain. There is also strength in Magna, Sierra Wireless and Rogers Communications. Nortel is up slightly, but Research in Motion is weaker, as is CoolBrands, Patheon, and MI Development. Hudson’s Bay is down about 2%, too.

In M&A news, ATI Technologies has acquired certain assets of AMI Technologies Corp., ATI’s exclusive sales organization for Taiwan and China since 1992. No price was announced, but ATI says that the deal is expected to reduce operating expenses, and strengthen ATI’s direct presence in these markets.

CCL Industries has sold four non-core business units in its container division. The purchaser is a private Ontario limited partnership, 50% owned by Douglas Brent, Hollis Brent and Gary Ullman, and 50% owned by CCL. CCL will receive proceeds of approximately $74 million in cash and $13 million in equity of IntraPac L.P.

Mitec Telecom has completed the sale of substantially all of the assets of its Swedish subsidiary to NOTE AB of Sweden. The proceeds from the sale will immediately contribute to reducing Mitec’s debt level.

On the earnings front, Inflazyme Pharmaceuticals Ltd. reported that it lost $3.6 million in the second quarter.

In the U.S., stocks have been drifting aimlessly this morning amid mixed economic news. However, the Dow Jones industrial average has gained some momentum at midday, gaining 35 points to 9,450. The Nasdaq composite index is nine points stronger at 1,819. The S&P 500 is up six points to 1,014.

The S&P/TSX Venture index is also slightly stronger, up more than a point to 1,318. Volume is very heavy at 35.2 million shares. Verena Minerals is leading the way, up 9.5¢ to 21¢, with 1.7 million shares changing hands.