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TSX muted

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Energy leads sectoral losses, materials leads gains

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Canada CPI cools to 40-month low

(Updated at 9:56 a.m. ET/ 1356 GMT)

By Nikhil Sharma

Aug 20 (Reuters) - Canada's main stock index was subdued

on Tuesday as losses in energy shares kept a check on gains from

the consumer prices data that showed inflation cooled to a

40-month low in July, raising hopes for another rate cut next

month.

At 9:56 a.m. ET (13:56 GMT), the S&P/TSX composite index

was up 3.48 points, or 0.02%, at 23,119.87, hovering

around its record highs.

The country's annual inflation rate dropped to 2.5% in July,

while it was up 0.4% on a monthly basis, indicating the Bank of

Canada could lower rates again in September.

"We get retail sales numbers this week. If it shows a

continued weakness, then it sets the pathway for them to

continue cutting at each meeting for the rest of the year,"

Macan Nia, co-chief investment strategist at Manulife Investment

Management, said.

According to a Reuters poll, the benchmark index can extend

its record-setting rally in the coming months and through 2025

as lower borrowing costs combat possible effects from slower

economic activity on corporate earnings.

On the Toronto Stock Exchange, energy led the

sectoral losses, sliding nearly 1% despite a rise in oil prices.

Tech and capped communications

shares were also among the top losers, down around 0.4% each.

Materials shares led the gains with a 1.4% rise,

tracking gold prices that hit a record high against a weaker

dollar amid higher bets for a U.S. September rate cut.

Among individual stocks, Gran Tierra Energy fell more than

5% after the company offered to buy London's i3 Energy ( ITEEF )

in a deal valued at 174.1 million pounds ($226.23 million).

A key event this week would be U.S. Federal Reserve

Chair Jerome Powell's commentary at the Jackson Hole Economic

Symposium on Friday, amid acknowledgments of a possible rate cut

in September.

Markets expect a 25-basis points reduction at the U.S.

central bank's policy meeting next month.