Bank of Canada downshift helps lift TSX to three-week high

By Fergal Smith

TORONTO (Reuters) - Canada's main stock index rallied on Wednesday to its highest closing level in more than three weeks, as a smaller-than-expected interest rate hike by the Bank of Canada fueled hopes the central bank is nearing the end of its tightening cycle.

The Toronto Stock Exchange's S&P/TSX composite index ended up 182.75 points, or nearly 1%, at 19,279.76, its highest closing level since Oct. 4.

"This bear market rally was about to run out of steam, but the Bank of Canada had other plans," Edward Moya, senior market analyst at OANDA in New York, said in a note.

The BoC raised its benchmark rate by half a percentage point, coming up short on calls for another 75 basis points move, and said it was getting closer to the end of its historic tightening campaign.

"We think they will likely hike another 25 bps (basis points) in December to end the hiking cycle," said Tiffany Wilding, North American economist at PIMCO.

The Toronto market's energy group rose 1.8% as U.S. crude oil futures settled 3% higher at $87.91 a barrel.

The materials group, which includes precious and base metals miners and fertilizer companies, added 1.8%, while industrials ended 1.3% higher.

Shares of Rogers Communications Inc jumped 5.8%, while Shaw Communications Inc shares were up 7.2% as investors bet that Canada is likely to approve Rogers Communications' bid for Shaw.

(Reporting by Fergal Smith; Additional reporting by Shashwat Chauhan in Bengaluru; Editing by Cynthia Osterman)