CANADA STOCKS-TSX rebounds from 3-week low, led by energy shares

(Adds investor quotes and details throughout, updates prices)

* TSX ends up 0.7%

* Energy sector jumps 4.3%; financials end up 0.6%

* U.S. crude oil futures settle 3.1% higher

* Canadian inflation rises to 18-year high

By Fergal Smith

TORONTO, Sept 15 (Reuters) - Canada's main stock index rallied on Wednesday as a jump in oil prices gave a boost to energy shares, while higher bond yields helped underpin financials.

The Toronto Stock Exchange's S&P/TSX composite index ended up 140.54 points, or 0.7%, at 20,693.79, rebounding from its lowest close in nearly three weeks the day before.

The day began with a rotation out of consumer discretionary and bank shares into energy, said Diana Avigdor, portfolio manager and head of trading at Barometer Capital Management.

"It's pretty positive out there, so once the selling dries out ... the path of least resistance is up and so we've seen everything rebound."

The energy group rose 4.3% to notch its highest level since July 14. Gains for the sector came as U.S. crude oil futures settled 3.1% higher at $72.61 a barrel, supported by a larger-than-expected drawdown in U.S. crude inventories.

The materials group, which includes precious and base metals miners and fertilizer companies, added 0.8%, while the heavily weighted financials sector ended with a 0.6% gain.

For banks, higher bond yields could offset some of the "anxiety" around the potential for higher taxes, Avigdor said.

Canadian bond yields rose after domestic data showed inflation rising at its fastest pace since March 2003.

Canada's ruling Liberal Party has said that if re-elected on Monday, it would raise corporate taxes on the most profitable banks and insurers to help pay for the cost of the COVID-19 recovery.

Shares of Canadian National Railway Co (CNI) ended 1.4% higher after the railroad operator scrapped its $29.6 billion offer for U.S.-based Kansas City Southern (KSU). (Reporting by Fergal Smith; Additional reporting by Amal S in Bengaluru; Editing by Peter Cooney)

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