By Fergal Smith
TORONTO (Reuters) - Canada's main stock index rose on Friday to its highest closing level in more than two weeks, including gains for resource and financial shares, as investors became more comfortable with the outlook for higher interest rates.
The Toronto Stock Exchange's S&P/TSX composite index ended up 281.66 points, or 1.5%, at 18,860.95, its highest closing level since Oct. 6.
The index was up 2.9% for the week, its biggest weekly gain since July.
U.S. stock indexes also climbed on Friday after a report said the Federal Reserve will likely debate on a smaller interest rate hike in December.
Stock markets globally have been hammered this year by worries aggressive central bank tightening to subdue inflation will derail economic activity.
"The bad news is mainly focused on interest rates and inflation," said Elvis Picardo, a portfolio manager at Luft Financial, iA Private Wealth. "Despite that, market action over the last couple of weeks suggest that investors are taking these risks in stride."
"Market action also seems to suggest we've been trying to find a bottom here," Picardo added.
The Toronto market's energy sector rose 1.7% as oil prices settled 0.6% higher at $85.05 a barrel.
The materials group, which includes precious and base metals miners and fertilizer companies, added 3.2% as gold and copper prices rose, while heavily-weighted financials ended 1.4% higher.
Domestic data showed retail sales growing 0.7% in August, blowing past expectations of an increase of 0.2%.
"Canadian economic numbers were decent," said Colin Cieszynski, chief market strategist at SIA Wealth Management.
"There's really nothing standing in the way of the Bank of Canada to continue their program of raising interest rates."
Money markets expect the BoC to raise interest rates by three-quarters of a percentage point to a 14-year high of 4% at a policy decision next Wednesday.