(There will be no Canada equities report on Jan. 1; Reuters

will resume coverage on Jan. 2)

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TSX up 0.3%, set for best year in three

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Communication services lead broader gains

(Updates after markets open)

By Ragini Mathur

Dec 31 (Reuters) - Canada's main stock index inched

higher in the final trading session of the year, a day

considered historically favorable for equities, on a boost by

energy stocks.

The S&P/TSX composite index was up 84.04 points,

or 0.34%, at 24,704.63.

The index is set for a drop in December, its first in six

months and its worst since May 2023, as the U.S. Federal

Reserve's hawkish policy announcement and domestic political

uncertainty made investors cautious.

The commodity-heavy index, however, benefited on the day

as the energy sector gained 1%, tracking oil prices

higher after data indicated an expansion in China's

manufacturing activity.

Most sectors inched higher, with communication services

in the lead with a 1.4% gain. The sector, however, is

set to lag its peers with an over 20% yearly decline.

Information technology, though in the red, was

poised to outperform other sectors on the index this year.

"History tells us that the last day before the end of

the year would be a positive" said Allan Small, senior

investment advisor at Allan Small Financial Group with iA

Private Wealth.

Policy easing by major central banks fueled a substantial

wave of stock purchases this year, positioning the benchmark

index for its best annual performance since 2021.

As the year concludes, market participants have scaled back

their expectations for significant rate cuts by the Fed in 2025

and are preparing for potential policy shifts with Donald

Trump's return to the White House.

"Donald Trump measures his success based on stock market

performance... and in saying that, when the U.S. markets do

well, Canada usually follows," said Small.

Most markets across the globe, including Canada, will be

closed on Wednesday on account of the New Year holiday.

Looking ahead, investors will focus on upcoming monthly

employment data from Canada and the United States, which will

offer insights into the monetary policy direction in both

countries.