TSX rises to highest close since September 2014

TORONTO (Reuters) - Canada’s main stock index rose on Wednesday to its highest close since September 2014, when it reached a record high, as investors bet that the rally in oil prices will lead to better growth in corporate earnings.

A Bay Street sign, a symbol of Canada's economic markets and where main financial institutions are located, is seen in Toronto, May 1, 2013. REUTERS/Mark Blinch

It was the second straight day of gains for the index after it surged 17.5 percent in 2016.

The market is pricing in better earnings growth for the first quarter following the rebound in crude oil from its February 2016 trough, said Kevin Headland, senior investment strategist at Manulife Investments. “Canadian earnings typically are highly correlated with energy on a year-over-year basis,” he said.

U.S. crude oil prices CLc1 settled 93 cents higher at $53.26 a barrel on expectations that U.S. crude inventories have dropped and on signs that the world's top oil exporters will stick to agreed output cuts that took effect this week.

Canada is a major producer of oil, which bottomed last February at $26.05.

The most influential movers on the index included its biggest bank, Royal Bank of Canada RY.TO, which rose 1.5 percent to C$92.84, and Encana Corp ECA.TO, which jumped 7.2 percent to C$17.22.

The oil and natural gas producer said it expects its margins in 2017 to exceed a previous target on lower costs and an expected rise in output in the second half of the year.

The broader energy group gained 0.3 percent, while financials advanced 0.9 percent as insurer Manulife Financial Corp MFC.TO added 1.1 percent and most of the country's big banks pushed higher.

As oil rallies, banks benefit from reduced loan loss provisions, while fewer job cuts and increased confidence support consumer-related stocks, said Headland, who is maintaining his exposure to Canadian stocks as the TSX approaches its September 2014 record peak at 15,685.13. But he added that sees less room for the index to rally than in 2016.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE closed up 113.72 points, or 0.74 percent, at 15,516.75, its highest close since Sept. 12, 2014.

Eight of the index’s 10 main groups ended higher.

WestJet Airlines Ltd WJA.TO rose 2.8 percent to C$23.73 and Canadian National Railway CNR.TO added 1.4 percent to C$91.72, helping the industrials sector rise 1.4 percent.

The materials group, which includes precious and base metals miners and fertilizer companies, added nearly 1 percent.

On the negative side of the ledger, major gold producer Barrick Gold Corp ABX.TO slipped 1 percent.

Additional reporting by Alastair Sharp; Editing by Meredith Mazzilli and Dan Grebler