TSX posts biggest gain in 2-1/2 years as U.S. inflation eases

FILE PHOTO: The facade of the original Toronto Stock Exchange building is seen in Toronto

By Fergal Smith

TORONTO (Reuters) - Canada's main stock index rose on Thursday to its highest closing level in two and a half months, led by resource and technology shares, as a smaller-than-expected rise in U.S. inflation triggered a rally in equity markets globally.

The Toronto Stock Exchange's S&P/TSX composite index ended up 646.11 points, or 3.3%, at 19,990.36, its biggest advance since April 2020 and its highest closing level since Aug. 25.

Wall Street also surged and the Canadian dollar jumped to a seven-week high against the greenback as U.S. consumer prices rose at an annual rate of less than 8% for the first time in eight months.

It was the strongest sign yet that inflation was slowing, which could allow the Federal Reserve to scale back its hefty interest rate hikes.

"People are interpreting it as good for resources and energy," said Michael Sprung, president at Sprung Investment Management.

The Toronto market's materials group, which includes precious and base metals miners and fertilizer companies, added 5.2% as gold and copper prices rallied. Energy was up 2.5%, with U.S. crude oil futures settling 0.8% higher at $86.47 a barrel.

Together, the materials and energy sectors account for roughly 30% of the TSX's weighting.

Technology was also a standout, jumping nearly 8% as bond yields tumbled, while heavily-weighted financials ended 3.4% higher.

Still, investors were cautious about reading too much into one month's data for inflation.

"I think it very unlikely that it's going away," Sprung said. "My view is that there is probably going to be some pretty volatile markets going forward still from here."

Among individual names, CAE Inc CAE.TO> shares soared 18.2% after the company posted quarterly revenue and profit above analyst estimates, as demand for flight simulators at its civil aviation and defense units surged.

(Reporting by Fergal Smith; Additional reporting by Shashwat Chauhan in Bengaluru; editing by Diane Craft)