By Fergal Smith
(Reuters) -Canada's main stock rose on Monday to its highest closing level in more than seven months as technology companies tracked gains for their Wall Street peers and investors awaited the Bank of Canada's interest rate decision later in the week.
The Toronto Stock Exchange's S&P/TSX composite index ended up 128.37 points, or 0.6%, at 20,631.58, its highest closing level since June 8.
"We are being pulled up from what's happening in the U.S.," said Philip Petursson, chief investment strategist at IG Wealth Management. "The tech sector is really what's driving it today."
Wall Street shares climbed, led higher by technology stocks, as investors embarked on an earnings-heavy week with renewed enthusiasm for market-leading momentum stocks that were battered last year.
Investors are betting "that the Fed next week is going to signal that they're much closer to a pause in their rate hiking cycle as the economic data continues to deteriorate," Petursson said.
The Federal Reserve is due to make an interest rate decision on Feb. 1, while the Bank of Canada is set to announce a policy decision on Wednesday.
Money markets see a 70% chance that Canada's central bank will raise its benchmark rate by a further 25 basis points to 4.50%.
Higher interest rates reduce the value to investors of the future cash flows that technology and other high-growth sectors are expected to produce.
The Toronto market's technology sector rose 2.9%, helped by a gain of 8.8% for e-commerce giant Shopify Inc after Deutsche Bank raised its rating on the stock to "buy" from "hold".
Heavily weighted financials gained 0.5%, while energy was up 0.8% as oil settled slightly lower, retreating as investors cashed in on a jump to a seven-week high on optimism about a possible recovery in demand from China.
(Reporting by Fergal Smith; Additional reporting by Shashwat Chauhan in Bengaluru; Editing by Shailesh Kuber and Jonathan Oatis)