June 25, 2008 / 8:51 PM / 11 years ago

UPDATE 3-Toronto stocks up as Fed decision offsets resources

(Updates closing numbers, adds details)

*TSX ends choppy session slightly higher

*Gains fueled by optimism U.S. will hold off raising rates

*Resource shares tumble as commodity prices fall

TORONTO, June 25 (Reuters) - The Toronto Stock Exchange’s main index finished slightly higher on Wednesday as a drop in resource issues was offset by optimism that the U.S. Federal Reserve would hold off on raising interest rates.

The heavyweight energy sector led the downside, battered by sagging oil prices after data showed U.S. crude inventories rose amid eroding demand.

Investors had their eyes trained south of the border as the Fed decided to pause in its aggressive campaign of cutting interest rates and held rates steady.

The central bank also signaled greater concern about inflation in its statement, while it said the downside risks to growth looked to have diminished somewhat.

“Basically they set the table that at some point they are more concerned about inflation than the economy, and rate cuts are over,” said Clement Gignac, chief economist and strategist at National Bank of Canada in Montreal, adding that rate hikes could be on the way.

The S&P/TSX composite index .GSPTSE closed up 31.53 points, or 0.22 percent, at 14,441.13 with six of its 10 main sectors pushing higher. In a volatile session, the index swung to both sides of the break-even mark, falling as low as 14,259.88.

The energy sector lost 1.2 percent, while the resource-laden materials sector was 1.1 percent lower, with gold producers declining as the price of bullion weakened.

Among energy companies, Canadian Natural Resources (CNQ.TO) was down C$2.28, or 2.3 percent, at C$97.82, while in the gold-mining sector, Barrick Gold (ABX.TO) was off 64 Canadian cents, or 1.5 percent, to C$40.81.

Fertilizer producer Potash Corp of Saskatchewan POT.TO also weighed on the materials sector, falling C$6.74, or 2.9 percent, to C$223.25.

Meanwhile, on the upside, the financial sector supported the benchmark, gaining 2 percent. All of the major banks were higher, including Canadian Imperial Bank of Commerce (CM.TO), which rose C$1.89, or 3.2 percent, to C$61.11. ($1=$1.01 Canadian) (Reporting by Leah Schnurr; Editing by Peter Galloway)

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