TSX ends higher as materials sector gains ground

By Fergal Smith

(Reuters) - Canada's main stock index ended slightly higher on Wednesday as gains for the materials sector and industrials offset declines for interest rate sensitive shares, ahead of key U.S. inflation data at the end of the week.

The Toronto Stock Exchange's S&P/TSX composite index ended up 5.42 points at 21,793.90, with investors awaiting the release on Friday of the U.S. personal consumption expenditures price index, the Federal Reserve's preferred inflation gauge.

"Every thing is on hold until Friday," said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth. "PCE coming out on the last day (of the month) is going to definitely move markets."

Canada's 10-year yield touched its highest level since June 11 at 3.482% after data on Tuesday showed a surprise acceleration in Canadian inflation.

The data has reduced the chances of the Bank of Canada cutting interest rates further in July, Small said.

Earlier this month, the BoC became the first G7 central bank to ease policy, cutting its benchmark rate by 25 basis points to 4.75%.

The materials group, which includes metal miners and fertilizer companies, rose 1.3%, to notch its highest closing level since June 10.

First Quantum Minerals Ltd shares were up 7.4% after Deutsche Bank raised its target price on the stock.

Industrials also posted gains, rising 0.6%.

Financials, which account for 29% of the Toronto market's weighting, fell 0.4%, with Onex Corp down 2.2%.

WestJet Airlines, which is part of Onex's portfolio of assets, said a union representing its maintenance engineers had rejected its new pay offer and served a second strike notice.

Real estate lost 1.3% and utilities ended 0.7% lower.

(Reporting by Fergal Smith in Toronto and Nikhil Sharma in Bengaluru; Editing by Vijay Kishore and Deepa Babington)