* TSX ends up 0.5% at 21,034.59
* Posts its highest closing level in one week
* Materials sector adds 2.1%
* IAMGOLD jumps 15.1%
Jan 23 (Reuters) - Canada's commodity-linked main stock index rose to a one-week high on Tuesday as mining shares rallied on hopes that China would take measures to support its ailing economy.
The Toronto Stock Exchange's S&P/TSX composite index ended up 110.29 points, or 0.5%, at 21,034.59, its fourth straight day of gains and its highest closing level since Jan. 15.
"China is seeing very weak performance for a little while now," said Diana Avigdor, portfolio manager and head of trading at Barometer Capital Management. "If you think that China is starting to see the other side ... I think that would be positive for the commodity complex."
Chinese authorities are considering measures to stabilize a slumping stock market, it was reported on Tuesday, a day after China's cabinet said it would step up mid- and long-term fund injection in the capital market.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 2.1% as copper and gold prices climbed.
Gold producer IAMGOLD Corp soared 15.1% after the company reported fourth-quarter production figures after the close on Monday.
Energy also rose but gains were held in check by weaker oil prices. The sector added 0.6%, while oil settled 0.5% lower at $74.37 a barrel.
Heavily weighed financials were up less than 0.1% but have rallied about 19% since October.
"We like the financials here. They are priced right," Avigdor said. "The economy is holding its own and that's why we think it's priced right. ... It's priced in all the negativity that it could."
The Bank of Canada is due to update its economic forecasts on Wednesday when the central bank is expected to leave its benchmark interest rate unchanged at a 22-year high of 5%. (Reporting by Fergal Smith in Toronto and Purvi Agarwal in Bengaluru; Editing by Ravi Prakash Kumar and Richard Chang)
