Interest rate sensitive shares lift TSX ahead of BoC decision

By Fergal Smith

(Reuters) -Canada's main stock index rose on Monday, with the real estate and utilities sectors leading a broad-based rally ahead of an expected interest rate cut this week by the Bank of Canada.

The S&P/TSX composite index ended up 182.26 points, or 0.8%, at 22,872.65, moving back in reach of the record closing high it touched last Tuesday at 22,995.39.

"Expectations seem to be pretty high for a small interest rate cut this week and so as a result I think investors are feeling a little more encouraged that the economy is capable of holding its own," said Michael Sprung, president at Sprung Investment Management.

The BoC is widely expected to cut its benchmark rate by 25 basis points to 4.50% on Wednesday, its second cut in as many months, after recent data showed inflation cooling.

"We are still in a very tumultuous period," Sprung said. "I personally don't believe that inflation is entirely beaten yet ... so I think we are going to have mixed signals for the rest of the year and the U.S. is election is part of that."

Wall Street also advanced as investors reexamined the state of the presidential race after U.S. President Joe Biden said he would not pursue a second term.

The real estate and utilities sectors, which are dominated by high dividend paying stocks that could particularly benefit from lower interest rates, rose nearly 2% and 1.3% respectively.

Heavily weighted financials added 0.9%, energy was up 0.8% and technology ended nearly 1% higher. Materials was the only major sector not to notch gains.

Shares of Sleep Country Canada Holdings Inc were a standout, jumping 27.1% after Fairfax Financial agreed to buy the retailer.

In contrast, Air Canada shares fell 2.5% after the company cut its full-year core profit forecast.

(Reporting by Fergal Smith in Toronto and Nikhil Sharma in Bengaluru; Editing by Shreya Biswas and Alistair Bell)