* Higher oil prices fuel TSX gain
* Drop in financial shares keep gain in check
* Investors hesitant ahead of Fed rate decision (Adds details)
TORONTO, Dec 16 (Reuters) - Toronto’s key stock index was higher late on Tuesday morning as expectations that OPEC will agree this week on the biggest supply cut it has ever made gave a shot in the arm to weighty energy shares.
But the market was unable to build momentum as each rise in the index was followed with a wave of selling that left the index mostly straddling the break-even level.
The energy group led with a gain of 3 percent with oil prices above $46 a barrel as the Organization of the Petroleum Exporting Countries is expected to announce it will cut up to 2 million barrels a day of production when it meets on Wednesday.
The materials sector was up 1 percent with fertilizer company Potash Corp of Saskatchewan POT.TO the top net gainer, up 6.3 percent at C$91.00.
Many traders were avoiding huge commitments until learning of the Federal Reserve’s interest rate decision and its thinking on policy at around 2:15 p.m. (1915 GMT) The Fed is expected to lower rates by at least half a percentage point to 0.5 percent.
That would follow last week’s rate cut by the Bank of Canada, which cut its key overnight rate by 75 basis points to 1.50 percent.
At 11:10 a.m. (1610 GMT), the S&P/TSX composite index .GSPTSE was up 48.59 points, or 0.57 percent, at 8,510.42, with six of its 10 main groups higher. Earlier, the index rallied briefly to 8,548.61, a gain of 86 points.
“The dynamic is everybody is waiting for the Fed decision and what they’re going to talk about in the future,” said Sal Masionis, stockbroker at Brant Securities.
Keeping the index’s gain in check was a 1.5 percent slide in the financial sector, which accounts for about a third of the overall index.
The financial group dropped as shares of Bank of Montreal (BMO.TO) tumbled 8 percent to C$29.92 after it said late on Monday that it would raise up to C$1.1 billion by selling common shares, the latest Canadian bank to shore up its capital levels this way. [ID:nN15520396].
Telus Corp (T.TO), Canada’s No. 2 phone company, said it expects 2009 earnings per share to rise by up to 10 percent and a revenue gain of up to 6 percent, helped by growth in its wireless and data businesses. [ID:nN16294868]
Its shares rose 0.67 percent to C$34.36, which was better than the 0.3 percent gain by the broader telecoms group.
$1=$1.23 Canadian Reporting by Frank Pingue; editing by Peter Galloway