TORONTO (Bloomberg) - Canadian stocks rose for a second day as energy producers and banks rallied after oil prices climbed on shrinking inventories and the country's index of leading economic indicators advanced.

Imperial Oil Ltd., the second-largest oil-sands producer, increased 2.1 percent. Toronto-Dominion Bank gained 1.7 percent to contribute the most to the Standard & Poor's/TSX Composite Index's advance. Teck Resources Ltd., the nation's largest base- metals producer, declined 2.1 percent as copper fell on concerns growth in China will falter.

"It's basically oil and gas and materials," which make up more than 45 percent of the index, said Chyanne Fickes, who helps manage C$720 million as vice president of investments at Stone Asset Management in Toronto. A report US inventories shrank "definitely had an impact on the price of oil and gas as well, so that's basically the issue here."

The S&P/TSX added 12.99 points, or 0.1 percent, to 10,686.83. A measure of energy stocks that makes up 28 percent of the S&P/TSX rose 0.2 percent after crude oil for September delivery increased 4.7 percent to $72.42 a barrel in New York on a U.S. government report that inventories declined the most in a year.

Imperial Oil climbed 2.1 percent to C$39.60, its biggest gain this month. Oil and gas producer Encana Corp. rose 0.6 percent to C$56.84. Crew Energy Inc., which produces oil and natural gas in Western Canada, led S&P/TSX gainers with a 4.5 percent surge to C$5.83.

"The inventories were significantly down, and that's a solid indication that there is some progress being made on the economy," said Mathieu Roy, an investment manager at Louisbourg Investments Inc. in Moncton, New Brunswick.

A gauge of banks and insurers that accounts for 32 percent of the index's value advanced 0.5 percent after Statistics Canada said the index of leading indicators rose for the first time in 11 months, increasing 0.4 percent in July, twice the rate forecast by economists surveyed by Bloomberg.

The country's consumer price index had its steepest drop since 1953, deflation that may encourage the Bank of Canada to keep its benchmark interest rate at 0.25 percent through June 2010. Canada's three largest banks - Royal Bank of Canada, Toronto-Dominion Bank and Bank of Nova Scotia - each advanced at least 0.8 percent.

Minefinders Corp. Ltd., which explores for precious metals, gained the most among S&P/TSX raw-materials companies with a 4.3 percent jump to C$9.24.

Base-metal producers declined as signs of slackening demand from China held down prices.

China's Shanghai Composite Index fell 4.3 percent today on concern tighter lending will dampen growth. China's benchmark index traded more than 20 percent below an Aug. 4 high to meet the threshold for a so-called bear market.

"The fact that China was down overnight and that it's become apparent that copper speculation has gotten out of hand, it's logical the market would correct and give back some of the gains here, which it did in the opening," said Douglas Davis, CEO of Davis-Rea Ltd. in Toronto, which manages C$400 million in assets.

Teck Resources slipped 2.1 percent to C$27.66 as copper for December delivery dropped to a two week low in New York. FNX Mining Co. Inc., which produces base metals in Ontario, declined 3.4 percent to C$9.18. FNX announced a plan yesterday to sell shares and warrants.

Manulife Financial Inc., which has 36 offices in China and may triple its operations there within five years, lost 0.6 percent to C$21.56. Its largest Canada-based competitor, Great- Wert Lifeco Inc., slipped 0.9 percent to C$24.49.

Research In Motion Ltd. declined 1.4 percent to C$80.33. The Globe and Mail reported the Canadian government is unlikely to block Nortel Networks Corp.'s sale of wireless-network technology to Ericsson AB. The BlackBerry smartphone maker, which also seeks the asset, asked the government this month to start new talks, saying the transaction would deprive the country of a vital technology.

Uranium-mining company Forsys Metals Corp., which is not in the S&P/TSX composite, sank 13 percent to C$5.40 after saying the Canadian government might delay the company's sale to George Forrest International Afrique Sprl. Forsys CEO Duane Parnham later told Bloomberg News the notice from the government may be "procedural."