CANADA STOCKS-TSX recoups much of February decline as financials rally

Updates at market close

By Fergal Smith

Feb 28 (Reuters) - Canada's main stock index rose on Friday, clawing back much of its monthly decline, led by gains for financial and industrial shares after domestic data showed the economy growing more strongly than expected.

The S&P/TSX composite index .GSPTSE ended up 265.21 points, or 1.1%, at 25,393.45. For the month, the index was down 0.6% as investors grappled with the threat of hefty U.S. tariffs on Canadian goods.

"The big picture is the whole tariff situation ... that's weighing on investor sentiment to some extent," said Elvis Picardo, portfolio manager at Luft Financial, iA Private Wealth.

"But at the same time, bank earnings, for instance, were exceptionally strong ... and I think that provided a measure of relief that the economy is perhaps on a better footing than most people expected."

Canada's gross domestic product expanded by 2.6% on an annualized basis in the fourth quarter, eclipsing forecasts for an increase of 1.8%, helped by a jump in consumer spending.

The six big Canadian banks, which are among the biggest publicly listed companies in Canada, this week beat analysts' expectations for first-quarter profits.

The financials group rose 1.3% on Friday, helped by a gain of 2.7% for Royal Bank of Canada RY.TO.

Industrials added 1.7%, while utilities ended 1% higher as bond yields declined.

The Canadian 10-year yield CA10YT=RR touched its lowest level since February 3 at 2.901%, tracking moves in U.S. Treasury yields after U.S. data showed annual inflation subsided last month.

The TSX is set to reach a new record high by the end of 2025, helped by lower borrowing costs, but an uncertain outlook for global trade could limit gains and potentially trigger a correction, a Reuters poll found on Wednesday.