CANADA STOCKS-TSX sheds gains to end almost flat after Fed keeps rates unchanged

By Twesha Dikshit and Promit Mukherjee

OTTAWA, June 18 (Reuters) - Canada's main stock index shed most of its gains to end almost flat on Wednesday after the U.S. Federal Reserve kept its policy rate unchanged and projected two rate cuts later this year but slowed the pace of future reductions.

The S&P/TSX composite index .GSPTSE rose 0.07% to 26,559.85 points, driven by a rise in information technology, real estate, industrial and healthcare shares.

Energy, utilities and mining shares dragged down the composite index.

The U.S. Federal Reserve kept its policy rate unchanged at its current 4.25%-4.50%.

While policymakers still anticipate cutting rates by half a percentage point this year, they slightly slowed the pace to a single quarter-percentage-point cut each in 2026 and 2027.

"There was a noticeable upturn in sentiment from investors as a result of the Fed decision," said Robert Gill, portfolio manager at Fairbank Investment Management Ltd, referring to the quick gains in the stock market after the Fed's policy decision.

The Federal Open Market Committee's projection of two rate cuts this year added to the positive momentum, he said.

However, shares on the Toronto Stock Exchange pared some of those gains as markets turned choppy after comments at the Fed's press conference.

"Halfway into 2025 and the Fed, like everyone else, remains paralyzed by elevated uncertainty," Ali Jaffery, senior economist at CIBC Capital Markets said in a note.

With conflict escalating in the oil-rich Middle East, investors also pondered over the possibility of a more direct U.S. military involvement in the Israel-Iran aerial war.

The conflict has pushed Brent crude oil futures by over $6 per barrel in the last ten days, but investor reaction to the conflict has been largely limited.

Brent crude oil futures LCoc1 were down 0.04% on Wednesday to $76.42 per barrel while spot gold XAU= was down 0.4% at $3,374.75 an ounce at 2000 GMT.

Canadian energy .SPTTEN and materials .GSPTTMT indexes were down 1.04% and 0.13% respectively.