TORONTO (Bloomberg) - Canadian stocks rose to the highest in six weeks, led by energy shares, on optimism that lower borrowing costs and higher oil prices will boost profits even as the economy may be slowed by losses on subprime mortgages.

Suncor Energy Inc. led energy shares higher as oil extended a record. Canadian National Railway Co. and Toronto-Dominion Bank paced gains among industrial and finance companies, on expectations the US Federal Reserve will cut borrowing costs next week to stimulate the economy and steady credit markets.

"The market's building in expectations of an interest rate cut into stock prices," said Paul Taylor, who helps oversee $9.6 billion as chief investment officer at BMO Harris Private Banking in Toronto. "We expected the Fed to cut by the end of 2007. The subprime mortgage problem has brought the timing forward."

The Standard & Poor's/TSX Composite Index rose 86.48, or 0.6 percent, to 13,843.20, climbing for third straight day, to the highest since July 31. It has advanced 7.2 percent this year even after falling from a record of 14,646.80 set on July 19.

Suncor Energy, the world's second-biggest oil-sands miner, rose C$3.81, or four percent, to C$100.13, climbing to near its April 2006 record of C$101.05.

Canadian Natural Resources Ltd., the country's second-largest natural-gas company, climbed C$1.82 to a record C$77.34.

Petro-Canada, the nation's third-biggest oil and gas producer, advanced C$1.71 to C$57.68.

Crude oil for October delivery climbed 18 cents to close at $80.09 a barrel and touched $80.20, the highest price since trading began in 1983 in New York, after Hurricane Humberto shut three refineries in Texas. Oil has gained 25 percent in a year, twice as much as the group of Canadian energy stocks.

"$80 to $90 oil will have an impact," said George Vasic, the Canadian market strategist of UBS Securities Canada Inc. "Even if oil goes sideways, energy companies will have strong earnings."

Canadian National Railway, the country's biggest railroad, climbed C$1.09 to C$57.83. Smaller rival Canadian Pacific Railway Ltd. increased 95 cents to C$72.20.

A measure of industrial companies, seen as among the most closely linked to economic growth, added 2.1 percent for the best gain among 10 industry groups in the S&P/TSX.

The Federal Reserve will cut its key interest rate by a full percentage point to 4.25 percent before the end of the year, according to options prices in the interest-rate futures market. Fed Chairman Ben Bernanke on September 1 said the central bank would do what is needed to prevent the credit-market turmoil from undoing the biggest economy's six-year expansion.

Toronto-Dominion, Canada's third-biggest lender by assets added 86 cents to C$72.75. Smaller rival National Bank of Canada advanced C$1.24 to C$53.50.

Lower borrowing costs may boost the value of bonds owned by banks and insurers, and increase demand for mortgages and loans.

"TD is the Cadillac of Canadian banking at this time because of the strength of its domestic commercial platform," said Taylor. "We believe the Canadian banks can continue to grow their earnings. They represent reasonable value, also because of their lack of any meaningful exposure to bad credits."

Nortel Networks Corp., North America's biggest phone-gear maker, fell 83 cents, or 4.7 percent, to C$16.99 after rival Alcatel-Lucent SA, the world's biggest maker of telecommunications equipment, cut its 2007 sales forecast on disappointing orders in North America.

An index of technology stocks fell 0.7 percent. It is still the best performer among 10 industry groups in the S&P/TSX in 2007, with an increase of 25 percent.

The following shares had unusual price changes.

Domtar Corp. (UFS CN) climbed 28 cents, or 3.4 percent, to C$8.62. North America's largest producer of office paper reached an agreement with Saskatchewan's government that may result in the redevelopment of its Prince Albert pulp mill.

Gabriel Resources Ltd.(GBU CN) fell 76 cents, or 21 percent, to C$2.80 and plunged as much as 44 percent. The developer of the Rosia Montana gold mine in Romania said an environmental review has been halted because of a move by a non-governmental organization chaired by billionaire George Soros.

Magna International Inc. (MG/A CN) gained C$2.09, or 2.3 percent, to C$91.93, after Magna Entertainment Corp. (MEC/A CN), an affiliated company, surged 45 cents, or 24 percent, to C$2.35. Magna Entertainment, a money-losing operator of horse-racing tracks, said it plans to raise as much as $700 million to cut debt by selling assets. Magna International is Magna Entertainment's biggest shareholder and Frank Stronach is the founder and chairman of both companies.

Noront Resources Ltd. (NOT CN) surged C$1.81, or 85 percent, to C$3.94 and was the most actively traded security on the Toronto Stock Exchange as more than 28 million shares changed hands. The stock has risen fourfold this week after the minerals explorer said in statement on September 10 that it made a new nickel and copper discovery at its Double Eagle project in Northern Ontario. Today, Noront said it released on its Web site new photos of samples taken during drilling at the property.

Pacific Stratus Energy Ltd. (PSE CN) fell C$1.60, or 14 percent, to C$9.60. The oil and gas explorer said in statement that tests at its La Creciente-2 project in Colombia were "inconclusive" because of water contamination.

Xceed Mortgage Corp. (XMC CN) fell 49 cents, or 14 percent, to C$3.03. The Toronto-based subprime mortgage lender suspended its dividend payment and said higher short-term debt costs may reduce cash flow by C$1m a month.