TORONTO — Canada's main stock index rose more than 100 points and the loonie climbed on Monday as U.S. media reported that Donald Trump would likely hold off on imposing tariffs on Canadian exports to the U.S. on his first day in office.
The S&P/TSX composite index closed up 103.66 points at 25,171.58. U.S. stock and commodity markets were closed for Martin Luther King Jr. Day.
The Canadian dollar traded for 69.78 cents US compared with 69.28 cents US on Friday.
Canadian markets on Monday got a boost from energy companies, said Brian Madden, chief investment officer with First Avenue Investment Counsel, with the TSX energy index rising 2.3 per cent.
That’s likely due to U.S. President Donald Trump’s inauguration, he said, as some of Trump’s policy promises would be beneficial for the industry.
The widespread cold snap is also likely a factor, boosting demand for natural gas, he added.
Beyond potential gains for energy, there’s a lot on the line with the new president in power, said Madden.
If Trump introduces the sweeping 25 per cent tariffs threatened on Canadian goods, “what's at stake for the economy is a trillion dollars worth of trade flow and potentially a deep recession,” he said.
Tariffs would also further weaken the loonie, said Madden.
The latest surveys on business and consumer sentiment from the Bank of Canada released Monday showed sentiment improving despite concerns about potential tariffs.
Tuesday will bring the report on December inflation, which Madden expects to show continued moderation.
“Inflation has been pretty well behaved here in Canada, much more so than in the U.S.,” he said, giving the Bank of Canada “license to cut much faster and deeper” than its U.S. counterpart.
“This is probably the last consequential piece of data that the Bank of Canada is going to look at as they formulate their decision for the Jan. 29 meeting.”
Madden expects the central bank to cut again at that meeting, as the divergence in interest rate policies between the Bank of Canada and the U.S. Federal Reserve continues to widen, weighing on the Canadian dollar.
“The U.S. ... they haven't really put the inflation genie back in the bottle at all,” he said, and some of Trump’s policies, notably the tariffs, could put upward pressure on consumer prices as well.
“The Fed is still restrictive, and it can be because the labour market is good, the economy is good and inflation is still problematic.”
This report by The Canadian Press was first published Jan. 20, 2025.
Companies in this story: (TSX:GSPTSE, TSX:CADUSD)
Rosa Saba, The Canadian Press
