Fed decision offsets resources for Toronto stocks

Wed Jun 25, 2008 5:09pm EDT
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By Leah Schnurr

TORONTO (Reuters) - The Toronto Stock Exchange's main index finished slightly higher on Wednesday as optimism that the U.S. Federal Reserve would hold off on raising interest rates offset a drop in resource issues.

The heavyweight energy sector led the fall, battered by sagging oil prices after data showed U.S. crude inventories rose amid eroding demand.

Investors had their eyes trained south of the border as the Fed paused in its aggressive campaign of cutting interest rates and held rates steady.

The Fed also signaled greater concern about inflation and said the downside risks to growth looked to have diminished somewhat.

"Basically they set the table that at some point they are more concerned about inflation than the economy, and rate cuts are over," said Clement Gignac, chief economist and strategist at National Bank of Canada in Montreal, adding that rate hikes could be on the way.

The S&P/TSX composite index closed up 31.53 points, or 0.22 percent, at 14,441.13 with six of its 10 main sectors pushing higher. In a volatile session, the index swung both sides of the break-even mark, falling as low as 14,259.88.

"It's probable now that we won't see any more rate changes, certainly for the summer and we'll see what the fall brings," said John Kinsey, portfolio manager at Caldwell Securities Ltd, of the Fed's rate decision.

The energy sector lost 1.2 percent, while the resource-laden materials sector was 1.1 percent lower, with gold producers declining as the price of bullion weakened.   Continued...

<p>A Toronto Stock Exchange (TSX) logo is seen in Toronto November 9, 2007. REUTERS/Mark Blinch</p>