CANADA STOCKS-TSX posts biggest gain since November on US inflation data

Updates at market close

By Fergal Smith

Jan 15 (Reuters) - Canada's main stock index rose on Wednesday, clawing back some recent declines, as data that showed underlying U.S. inflation cooled in December raised hopes of additional interest rate cuts by the Federal Reserve and the Bank of Canada.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE ended up 200.72 points, or 0.8%, at 24,789.30, its biggest gain since Nov. 21.

"It's a bit of a relief rally but it's a relief rally with support," said Ben Jang, a portfolio manager at Nicola Wealth.

Recent domestic jobs data has showed that the domestic economy is stronger than people thought, and the U.S. inflation data offers a potential path to a Fed interest rate cut, Jang said.

A narrower interest rate differential between the United States and Canada would give the Bank of Canada more room to ease policy further if it needs to, Jang added.

Wall Street surged as the U.S. core consumer price index slowed to 3.2% in December and major U.S. banks posted solid earnings reports.

"Strong earnings by banks in the U.S. should be positive for the Canadian banks, especially the ones with U.S. exposure," said Ian Chong, portfolio manager at First Avenue Investment Counsel.

The financials sector, which accounts for 31% of the TSX's weighting, rose 1.2% and technology ended 2% higher.

The interest-rate sensitive real estate sector added 1.5%. Canada's 10-year bond yield was down 12.2 basis points at 3.421%, pulling back from an earlier six-month high.

Canadian home sales took a breather in December but were still 10% higher in the fourth quarter compared to the third quarter as the BoC cut borrowing costs, data from the Canadian Real Estate Association (CREA) showed.

(Reporting by Fergal Smith in Toronto and Ragini Mathur in Bengaluru; Editing by Leroy Leo and Will Dunham)

((fergal.smith@thomsonreuters.com; +1 647 480 7446))