TSX rebounds as Bank of Canada hikes interest rates as expected

By Fergal Smith

TORONTO (Reuters) - Canada's main stock index rallied on Wednesday, including gains for the financial and industrial sectors, as the Bank of Canada delivered a supersized but unsurprising rate hike and despite a tumble in oil prices which weighed on energy shares.

The Toronto Stock Exchange's S&P/TSX composite index ended up 153.29 points, or 0.8%, at 19,241.44, after posting on Tuesday its lowest closing level since July 26.

Equity markets globally have been buffeted in recent weeks by prospects of additional central bank tightening to tackle soaring inflation.

The Bank of Canada raised its benchmark interest rate by 75 basis points to a 14-year high of 3.25%, as expected, and said rates would need to go still.

"The most interesting element is the extent to which the Bank of Canada seems to be lifting its foot slightly off the brakes in the sense that it is no longer talking about front loading policy," said Eric Lascelles, chief economist for RBC Global Asset Management.

"We're now into the deceleration phase of tightening, not yet at a peak ..., slowing down with the end plausibly in sight but still a lot of dependency on where inflation goes."

U.S. stock indexes also climbed following a recent sell-off as bond yields eased.

Heavily weighted financials rose 1.1%, while industrials ended 1.7% higher.

The materials group, which includes precious and base metals miners and fertilizer companies, added 1.8% as gold prices rose.

Capping gains for the index was a 3.1% drop for the energy sector as oil prices settled down nearly $5 to $81.94 a barrel, trading at their lowest since Russia invaded Ukraine. [O/R]

(Additional reporting by Aniruddha Ghosh in Bengaluru; Editing by Anil D'Silva and Richard Chang)