By Rebecca L. McClay, MarketWatch SAN FRANCISCO (MarketWatch) -- Canadian stocks fell Tuesday after Canada's central bank increased interest rates, with declines moderated by a rise in financial shares. The S&P/TSX Composite index (CA:$ISPTX 11,572, -191.02, -1.62%) fell 191 points, or 1.6%, to 11,572, led by a drop in mining stocks. The S&P/TSX Metals and Mining Index (CA:TTMN 866.53, -55.13, -5.98%) pulled the broader market lower, falling 6.0%. Canadian Natural Resources (CA:CNQ 35.15, -2.10, -5.64%) dropped 5.6%, First Quantum Minerals (CA:FM 54.65, -1.75, -3.10%) was off by 3.1% and HudBay Minerals (CA:HBM 11.28, -0.87, -7.16%) was down by 7.2%. The S&P/TSX Capped Energy Trust (CA:RTEN 138.61, -4.04, -2.83%) lost 2.8%. For the first time in three years, the Bank of Canada hiked its benchmark interest rate 25 basis points to 0.50% Tuesday, making Canada the first G7 country to increase rates after the global financial crisis. The central bank's move was widely expected after the Canadian economy grew at a 6.1% pace in the first quarter. Derek Holt, vice president of Capital Markets Research at Scotia Capital, said the interest rate hike along with hints that another increase may be avoided, created a "bit of a double-edge sword effect" that led to a sagging TSX index. Softening the broader market's loss, S&P/TSX Capped Financials Index (CA:TTFS 176.42, -0.95, -0.54%) increased 0.2%. Canadian shares of the Bank of Nova Scotia (CA:BNS 49.52, +1.27, +2.63%) (BNS 47.05, +1.39, +3.04%) led financial stocks as shares increased 2.7% after the bank reported second-quarter results above analysts' expectations. The bank reported a profit of $1.1 billion, up 25% from the same quarter last year. The loonie also weakened against the U.S. dollar, with one greenback buying C$1.055, up 1.1%. "USD/CAD has bounced a bit following the Bank of Canada decision in what appears to be a normal profit-taking against the news," said Colin Cieszynski, an analyst at CMC Markets. A disappointing report on manufacturing in China contributed to the broader market decline. The official China Federation of Logistics and Purchasing Managers index fell to 53.9 from 55.7 in April, indicating continued growth, but at a slower pace, and another key gauge also fell. See Economic Report on China manufacturing. Porter Aviation Holdings, which postponed its initial public offering until Tuesday, ultimately decided not to follow through with an IPO, citing unfavorable market conditions. Lately, Canada has benefited from rising demand for gold. Gold ended higher Tuesday after the Institute for Supply Management's manufacturing index for May showed stronger-than-expected expansion. Gold for August deliver gained $11.90, or about 1% to $1,226.90 an ounce. Barrick Gold Corporation (CA:ABX 44.91, +0.76, +1.72%) shares rose 2.7%.

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