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CANADA STOCKS-Rail merger news lifts industrial stocks to record high

(Adds comments; updates prices)

Sept 1 (Reuters) - Canada’s main index rose on Wednesday as railroad stocks jumped after regulators halted Canadian National’s deal to buy U.S. peer Kansas City Southern, potentially paving the way for rival Canadian Pacific to usurp the deal.

At 10:39 a.m. ET (1439 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 0.57% at 20,699.87.

The industrials index rose 2.1% to a record high, as both Canadian Pacific Railway Ltd and Canadian National Railway Co jumped about 4% following the rejection of a voting trust structure that would have allowed the latter to buy Kansas City for $29 billion.

The two Canadian companies are competing to buy the U.S. railroad and Canadian Pacific initially fell 5% on Tuesday as investors priced in a greater likelihood of it having to make good on its own $25 billion offer for Kansas City.

Traders said many now thought the deal would be good for Canadian Pacific.

“We’re seeing the continuation of the short cover from Canadian National today and more people picking up that the Canadian Pacific sell-off yesterday was overdone and it’s probably going to be good news if they can win this deal,” said Gregory Taylor, portfolio manager at Purpose Investments.

Canada’s benchmark equity index has risen for seven straight months, tracking a jump in its U.S. peers as investors bet on easy money to lift demand for risky assets despite signs of a wobbly economic rebound.

Data on Wednesday showed Canadian manufacturing activity grew in August at the fastest pace in four months as new orders climbed and firms scrambled to reduce the risk of running out of the stocks they need for production.

Heavyweight energy stocks stocks lagged the broader market on a slip in oil prices ahead of an OPEC+ meeting.

HIGHLIGHTS

* Capstone Mining and Torex Gold Resources were the biggest percentage decliners on the TSX.

* The TSX posted twelve new 52-week highs and one new low.

* Across all Canadian issues there were 107 new 52-week highs and 10 new lows, with total volume of 98.70 million shares. (Reporting by Amal S and Sagarika Jaisinghani in Bengaluru; Editing by Saumyadeb Chakrabarty)

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