TSX climbs to 18-month high ahead of Christmas break

By Fergal Smith

(Reuters) -Canada's main stock index rose to an 18-month high on Friday, with the index posting broad-based gains ahead of the Christmas holiday weekend as cooling U.S. inflation bolstered investor hopes of a soft landing for the economy.

The Toronto Stock Exchange's S&P/TSX composite index ended up 115.46 points, or 0.6%, at 20,881.19, its highest closing level since June 2022.

For the week, the index added 1.7%. It is set to be closed on Monday and Tuesday for Christmas Day and Boxing Day, respectively.

U.S. benchmark the S&P 500 also gained as data showed that U.S. prices fell in November for the first time in more than 3-1/2 years, boosting financial market expectations of an interest rate cut from the Federal Reserve next March.

"Equity markets are closing 2023 on a strong note, with a sharp decline in Treasury yields, the prospect of 2024 rate cuts and a coveted soft landing all on investors’ radar," Robert Kavcic, senior economist at BMO Capital Markets, said in a note.

The Canadian economy's soft patch continued for the third straight month in October and a modest growth forecast for November will further support investors' bets on an interest rate cut in the first quarter of next year, economists said.

Stocks that tend to produce predictable cash flows, so-called bond proxies, could particularly benefit from rate cuts.

They were among the biggest gainers, with the consumer staples sector climbing 1% and real estate ending 1.1% higher.

All 10 major sectors notched gains. Heavily weighted financials were up 0.6%, and the materials group, which includes precious and base metals miners and fertilizer companies, added 0.7% as gold prices rose.

TFI International was a standout. Its shares climbed 7.9% after the logistics company said it had agreed to acquire Daseke in a deal valued at about $1.1 billion.

(Reporting by Fergal Smith in Toronto and Shashwat Chauhan in Bengaluru; Editing by Ravi Prakash Kumar and Cynthia Osterman)