TSX posts biggest weekly gain in 11 months on Fed optimism

By Fergal Smith

(Reuters) -Canada's main stock index rose to an all-time high on Friday in a broad-based rally, led by mining stocks, as expectations rose the U.S. Federal Reserve would opt for an oversized interest rate cut at a policy decision next week.

The Toronto Stock Exchange's S&P/TSX composite index ended up 93.51 points, or 0.4%, at 23,568.65, moving past the record closing high it set on Thursday. For the week, the index was up 3.5%, its biggest weekly gain since October.

"This is the everything rally going on. We've got equities up, we've got bonds working, commodities going," said Greg Taylor, a portfolio manager at Purpose Investments.

"We're getting a lot of expectations that the Fed next week is going to do a 50 basis-point cut. Markets seem to be cheering that on."

Wall Street's main indexes also rose as investors priced in a near 50% chance of a half-percentage-point reduction in interest rates by the Fed at a policy decision due on Wednesday.

The Toronto market's materials group, which includes fertilizer companies and metal mining shares, rose 1.5% as gold and copper prices climbed, notching its highest closing level since April 2022.

Technology added 0.7% and real estate, which could particularly benefit from lower borrowing costs, ended 2.1% higher.

Canada's 2-year yield fell nearly 6 basis points to 2.945%, its lowest level in more than two years.

The Canadian government will not intervene to end a dispute between Air Canada and its pilots and intends instead to pressure both sides to avert a strike, Prime Minister Justin Trudeau said. Air Canada's shares ended nearly 1% higher.

(Reporting by Fergal Smith in Toronto and Nikhil Sharma in Bengaluru; Editing by Maju Samuel and Marguerita Choy)