TORONTO (Reuters) - Canada's main stock index surged on Wednesday as a jump in oil prices boosted energy stocks and investors braced ahead of Thursday's pivotal U.S. Federal Reserve rate decision.
The overall group of oil and gas stocks jumped more than 5 percent after a sharp drawdown in U.S. stockpiles. [O/R]
The broader Canadian market followed suit, with just 17 out of almost 250 stocks ending in the red and most of the 10 main groups adding more than 1 percent.
The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE rose 301.07 points, or 2.24 percent, to 13,763.78.
"The direction is correct, the magnitude has several reasons," said Diana Avigdor, head of trading at Barometer Capital Management. She said the move higher was likely exaggerated by lack of liquidity, option expiries, overnight headlines out of Asia and the U.S. crude stockpile data.
The financials group, including Canada's largest banks and their exposure to the energy sector, climbed 2 percent.
The Fed is due to announce a decision on Thursday afternoon to either end or extend seven years of near-zero interest rates, potentially relieving markets of months of uncertainty as investors have been trying to predict the timing for a hike.
Avigdor said clarity from the Fed should help push equities higher, though crude oil price volatility will remain a risk.
"It's watching paint dry for the next 24 hours," she said.
The materials group jumped 3.8 percent. Combined with financials and energy, the three sectors make up almost two-thirds of the index's weight.
"There's a sense that the Fed won't increase rates tomorrow. We'll have to see if that's the case," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier.
"If that's the mentality, then the U.S. dollar may come off a bit more and commodities may rally some more. I don't know how sustainable that is, but that seems to be what's going on currently."
Editing by Chris Reese