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TORONTO (Reuters) - Canada's main stock index halted its three-day skid on Wednesday, rising with mining shares as investors were hopeful that deteriorating global economic conditions would spur stimulus moves by central banks in the United States and Europe.
Weak data from the United States and Europe raised expectations the Federal Reserve and European Central Bank would announce more monetary easing measures when they hold meetings next week.
ECB Governing Council member Ewald Nowotny said there were arguments for giving Europe's new permanent rescue fund a banking license, enabling it to borrow unlimited central bank money and so boosting its capacity to prevent the crisis from spreading.
"We've seen this phase for the past couple summers, where the economic data starts coming in a little bit weaker and the market turns to central banks for more gas in the engine," said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.
The news was welcomed by Canada's beaten-down materials sector, which climbed 1.5 percent as gold mining stocks rallied with bullion prices. <GOL/>
Energy shares also turned higher, edging up 0.1 percent as oil prices rebounded on increased Middle East turmoil and hopes for further Fed stimulus. <O/R>
Suncor Energy (SU.TO) -- Canada's largest oil producer -- led gains, rising 3.7 percent to C$30.87 a day after reporting a 28 percent jump in second-quarter profit. The company also said on Wednesday it will no longer commit to an ambitious growth program that had troubled some shareholders.
Oil gains were nearly offset by weak earnings from Cenovus Energy (CVE.TO), whose shares slid 3 percent to C$31.15 after the oil firm reported a 40 percent drop in second-quarter profit and called off its search for a partner to help develop the Telephone Lake oil sands project in Alberta.
TransAlta Corp TA.TO shares tumbled 3.5 percent to C$15.60 after the oil and gas firm said it estimates a loss in the second-quarter compared with a year earlier.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended up 25.56 points, or 0.2 percent, at 11,492.51.
In the latest sign the American recovery was faltering, data on Wednesday showed U.S. single-family home sales in June fell by the most in more than a year. <ID:L2E8IP753>
In Europe, German business sentiment dropped to its lowest level in over two years, reinforcing the view that even the euro zone's biggest economy was being damaged by the debt crisis.
The news comes on the heels of a decision by ratings agency Moody's Investors Service to revise Germany's credit outlook to negative from stable.
"It looks like Germany will avoid a recession, but the question is for how long?" said Pat McHugh, Canadian equity strategist at Manulife Asset Management. "The economic news just keeps getting worse."
Canada's powerhouse financial services sector led declines, dipping 0.4 percent. Leading losses was Royal Bank of Canada (RY.TO), down 0.8 percent to C$50.39, Bank of Nova Scotia (BNS.TO), off 1.1 percent at C$50.61, and Toronto-Dominion Bank (TD.TO), which sagged 0.4 percent to C$78.08.
Second-quarter earnings from Canada's largest diversified miner, railroad and grocery store chain also failed to excite.
Teck Resources Inc TCKb.TO plunged 7.3 percent to C$27.27 after the miner said lower coal and metal prices contributed to a steeper-than-expected drop in quarterly profit and that it sees no reprieve anytime soon.
Shares of Loblaw Cos Ltd L.TO fell 1.5 percent to C$31.45 after the grocer reported lower quarterly profit on Wednesday, as sales growth lagged an increase in expenses.
Even Canadian National Railway Co (CNR.TO), which reported a 17 percent rise in second-quarter profit, saw its shares slide 0.5 percent to C$86.83.
However, shares of Canadian Pacific Railway (CP.TO), CN's main competitor, jumped 5.2 percent to C$78.97 after reporting its second-quarter net income rose to C$631 million from C$538 million a year earlier.
While mostly disappointing, Edward Jones' Fehr said the earnings were consistent with the "sluggish" economic backdrop.
"The market is readjusting to the new earnings growth pace that we're likely to see for the next couple of quarters," he added.
Editing by Gary Crosse