June 12 (Reuters) - Canada's benchmark stock index rose on Friday as global risk sentiment improved on hopes of an imminent Middle East deal, with a source telling Reuters that a U.S.-Iran memorandum could be signed as early as Sunday.

At 10:21 a.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was down 0.7% at 34,926.25 points.

o The source said the language in the memorandum was still being finalized, and Iran was sticking to its position that the deal must also end fighting in Lebanon, where Israel has been battling against Iran-backed Hezbollah militia.

o "I'd say right now there is optimism this will be a lasting peace," said Shiraz Ahmed, founder at Sartorial Wealth. He added that investors, however, were skeptical since they've heard the same story for two-three months.

o "There will likely be a bit of a knee-jerk reaction if we do have a lasting peace."

o The materials group, which includes stocks of metal miners, was up 2.1%, leading gains on the TSX, with Montage Gold, Taseko Mines and Ivanhoe Mines up between 5.1% and 9.7%.

o Seven of the 10 TSX sectors were in the green with the financials sub-index also supporting gains, up 0.7%.

o Meanwhile, the technology sub-index fell 1.2%, capping the upside, with MDA Space leading losses, down 6.5% ahead of Elon Musk's SpaceX's Nasdaq debut, expected to be the largest public listing in history.

o The Canadian benchmark stock index was on track for marginal weekly gains, supported by advances on optimism over de-escalation in the Middle East.

(Reporting by Tharuniyaa Lakshmi in Bengaluru; Editing by Diti Pujara)

By Tharuniyaa Lakshmi