TORONTO (Reuters) - Canada’s main stock index rebounded on Wednesday from a 2017 low hit in the previous session, led by gains for natural resource shares as commodity prices rallied, while investors took the latest Federal Reserve interest rate hike in stride.
The Fed raised rates for the second time in three months, while officials at the U.S. central bank stuck to their outlook for two more rate hikes this year and three in 2018.
“If they raise rates because the economy is moving ahead and inflation is relatively benign ... then I think the market will readily accept it,” said Ian Nakamoto, equity specialist at MacDougall, MacDougall & MacTier, a division of Raymond James.
“The last thing we need is for them to be behind the curve, because we always get rates much higher than expected and then you come down with a thud, the economy and the stock market.”
The Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE closed up 141.30 points, or 0.92 percent, at 15,520.91. The index had its lowest close of the year on Tuesday.
The energy sector climbed nearly 3 percent as oil prices pulled out of a dive, with the most influential gainers including Encana Corp (ECA.TO), which rose 5.7 percent to C$14.69.
U.S. crude oil futures CLc1 settled $1.14 higher at $46.86 a barrel on a surprise drawdown in U.S. crude inventories and data from the International Energy Agency suggesting OPEC cuts could create a crude deficit in the first half of 2017.
The materials group, which includes precious and base metals miners and fertilizer companies, jumped 4.4 percent as higher prices for copper and other industrial metals boosted base metal miners. Gold producers also gained as bullion prices rose.
Copper prices CMCU3 advanced 0.8 percent to $5,863.85 a ton and gold futures GCc1 rose 1.6 percent to $1,221.2 an ounce. [MET/L][GOL/]
The financials group was the only one of the index’s 10 main groups to lose ground, falling 0.5 percent as bond yields fell and after Canada’s financial watchdog said it will review business practices at federally regulated institutions following allegations they sold products to consumers without obtaining their consent.
Higher bond yields would lower the value of insurance companies’ liabilities and increase net interest margins of banks.
Still, Manulife Financial Corp (MFC.TO) rose 0.7 percent to C$24.49. It has been granted a license that will allow it to launch investment products in China through a wholly-owned local subsidiary.
Additional reporting by Alastair Sharp; Editing by W Simon and James Dalgleish