TORONTO (Reuters) - Toronto's main stock index closed higher for a second straight session on Tuesday as a rebound in the price of oil sent the hefty energy group higher.
But declining financials and materials, two of the index's weightiest sectors, kept the gains in check after the Bank of Canada made its clearest signal yet that it may raise interest rates as soon as June, while the price of gold pared gains.
The energy sector jumped 1.16 percent as oil snapped its three-day decline to rise above $83 a barrel as some European flights resumed after the threat from volcanic ash from Iceland receded.
Shares of Suncor Energy Inc, Canada's largest oil company, rose 0.59 percent to C$34.25, while Husky Energy rose 2.24 percent to C$29.72. Talisman Energy gained 3.96 percent to C$17.33.
"Energy stocks are one of the strong sectors today, largely because crude oil has jumped up $2. The markets are also taking their cue from the U.S.," said Elvis Picardo, analyst and strategist at Global Securities.
Stunningly strong earnings from Goldman Sachs on Tuesday were added to the list of U.S. companies making forecast-beating results. But worries about the bank's U.S. fraud case still weighed as Britain's market watchdog launched its own probe.
Picardo said U.S. earnings reports so far have generally exceeded estimates and Canadian investors are gearing up for similar results from domestic businesses.
The Toronto Stock Exchange's S&P/TSX composite index ended 10.56 points, or 0.09 percent, higher at 12,113.53. Six of the index's 10 main groups were higher.
Materials, home to gold producers, turned lower to end down 0.56 percent. Improved risk appetite boosted copper prices and other base metals, lifting shares of companies like First Quantum Minerals, up 1.63 percent at C$81.26.
Gold producers, however, lagged the price of the metal as investors saw waning momentum to take shares higher. Barrick Gold Corp, the world's biggest producer, skidded 1.84 percent to C$39.03.
Financials handed back 0.43 percent, following the Bank of Canada's more hawkish tone, as higher interest rates make the cost of lending higher and could crimp banks' margins.
Most of the country's big banks finishing lower a day after the sector posted a near 1 percent gain.
Royal Bank of Canada was off 0.3 percent at C$61.31, while Canadian Imperial Bank of Commerce slipped 0.68 percent to C$75.70. Bank of Montreal was up 0.48 percent to C$64.50.
But the overall index appeared to take the prospect of higher interest rates in stride, eking out a second day of gains.
"This is priced in ... this is the bottom of the cycle and our generation will never see low interest rates like this again," said Barry Schwartz, vice-president and portfolio manager at Baskin Financial Services.
Additional reporting by Claire Sibonney; editing by Rob Wilson