May 21, 2008 / 1:12 PM / 11 years ago

Toronto stocks set to ride oil to uncharted high

*Record oil to push TSX to new record

*Talisman may benefit from overhaul plan

*Higher-than-expected inflation may dampen stocks

TORONTO, May 21 (Reuters) - The Toronto Stock Exchange’s main index, riding a wave of bullish oil, was set to rise again on Wednesday as crude topped $130 a barrel in early futures activity.

The Canadian benchmark index kicks off the session above the 15,000-level for the first time, and may also get a lift from Talisman Energy TLM.TO, which late on Tuesday detailed a plan aimed at boosting returns.

Natural gas and gold were also firm, but crude oil was center stage on Wednesday, reaching a record high on the back of tight fuel stocks and long-term production concerns. For details, see: [nSP114922]

“I suspect the oil will be enough to keep us afloat here today,” said Michael Sprung, president at Sprung & Co. Investment Counsel.

If there was a sour note, however, it was the consumer price index, which showed Canadian inflation rose more than expected last month due largely to rising gasoline prices. See: [nN21333512]

The data was seen to somewhat dampen expectations of further interest rate cuts, which the Bank of Canada has used to stimulate the economy and, as a result, Canadian stocks.

“A lot of the positive economic growth has been kept alive by rate cuts,” said Sprung. “I think that inflationary pressure is going to severely stem the ability to continue to cut rates toward the end of this year, if not sooner.”

Canada’s central bank has slashed 150 basis points from its key rate since the start of December. It is widely expected to cut again at its next fixed decision date in June.

Talisman’s plan is to sell non-core assets in the Netherlands, Trinidad and Denmark, shedding up to 45,000 barrels of oil equivalent a day, Canada’s third-biggest independent oil explorer said. See: [nN20492862]

Elsewhere, Nortel Networks NT.TO reconfirmed its outlook for 2008, and detailed $500 million in a proposed senior notes offering. See: [nN21380188]

The S&P/TSX composite index .GSPTSE starts the day at 15,047.34 after rising 63.14 points, or 0.4 percent, in the previous session. ($1=$0.98 Canadian) (Reporting by Jonathan Spicer; Editing by Scott Anderson)

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