Canada's TSX inches up as retreating oil prices lift market sentiment

By Purvi Agarwal and Rashika Singh

March 16 (Reuters) - Canada's main stock index closed higher on Monday, after three sessions of declines, as investors took cues from Wall Street and welcomed a pullback in oil prices, even as the war in the Middle East raged on.

At the closing trade the S&P/TSX composite index .GSPTSE closed up 1.03% at 32,876.65 points. The index recorded its biggest daily gain since February 26, before the conflict began.

Oil prices retreated amid attacks on Gulf oil production and U.S. President Donald Trump's call for a global effort to secure the Strait of Hormuz, though both crude benchmarks remain up more than 40% this month, and are at their highest levels since 2022. O/R

The pullback in oil prices lifted broader risk appetite, with all sectors on the TSX trading higher. But it was particularly the construction, gold and critical mineral mining companies that stood apart. Even energy stocks .SPTTEN closed up 0.64%, after hitting their highest level since September 2008 in the previous session.

"Due to fears of oil-induced inflation and a potential global slowdown, stocks are currently inversely correlated with oil prices... This coupling is temporary and provides an opportunity to investors to increase selective stock exposure at favorable valuations," said Richard Saperstein, chief investment officer, Treasury Partners.

As a net oil exporter, Canada may be better shielded than many peers from the conflict-driven oil spike, offering some cushion as other indicators cool.

Meanwhile, information technology .SPTTTK stocks closed up 1.4%, tracking robust gains on the tech-heavy U.S. Nasdaq. Shares of miners .SPTTMT rose 1.7%, even as metal prices vacillated between gains and losses. GOL/ MET/L On Monday shares of Quebec based 5N Plus VNP.TO a manufacturer of high end semiconductors and critical minerals such as antimony closed up 4.78%, the top mover at the end of trading day was reality service provider Altus Group that closed up 9% as it announced a buyback of shares.

This week, investors will look to the U.S. Federal Reserve and the Bank of Canada for cues on the central banks' monetary policy outlook, as the U.S.-Israeli war on Iran stokes inflation worries, clouding the prospects for rate cuts.

Economists polled by Reuters expect the BoC to keep its overnight rate unchanged next week and through the rest of the year, for now looking past inflation risks stemming from the Middle East war.

Separately, data showed Canada's annual inflation rate eased to 1.8% in February.