Canada’s currency and main stock index climbed to five-week highs on Monday, as investors expressed relief that the country would avoid immediate U.S. trade tariffs from President Donald Trump. Energy and industrial shares led gains on the TSX.
“There is a collective sigh of relief,” said Greg Taylor, a portfolio manager at Purpose Investments. “This is probably a lot more measured than some had feared and that’s why we’re seeing more green on the screen today and a bit of a bounce in the energy stocks and some of the materials.”
Trading volumes were lighter than usual with U.S. markets closed for Martin Luther King Jr. Day. U.S futures markets were open, however, and traded higher following the inauguration, with contracts on the S&P 500 index up around 0.3%. The U.S. dollar saw broad-based weakness across currencies.
“We’ll get a way better indication [on Tuesday] once there’s more players back but so far I think this is a pretty welcome start to the next four years,” Taylor said.
Trump will issue a broad trade memo that stops short of imposing new tariffs on his first day in office but directs federal agencies to evaluate U.S. trade relationships with China, Canada and Mexico, reports said Monday. Trump had threatened an immediate 25% tariff on Canadian goods.
Meanwhile, Bank of Canada surveys Monday found that Canadian firms expect to see improved demand and sales in the coming year, largely fueled by interest rate cuts, but are concerned about the potential damage from promised U.S. policies.
The S&P/TSX composite index ended up 103.66 points, or 0.4%, at 25,171.58, its fifth straight day of gains and the highest closing level since Dec. 13.
Industrials rose 0.8%, helped by a gain of 7.2% for the shares of business jet exporter Bombardier Inc.
Energy was up 2.3% despite lower oil prices. Shares of Canadian Natural Resources Ltd, Canada’s largest oil and gas producer, added 4.4%.
The materials group ended 1.2% higher as gold prices rose.
By late afternoon, the loonie was trading 1.1% higher at 1.4325 per U.S. dollar, or 69.81 U.S. cents, after touching its strongest intraday level since Dec. 17 at 1.4262. Earlier on Monday, the loonie touched its weakest level since March 2020 at 1.4485.
Canada will release its latest reading on inflation Tuesday. A year-over-year increase of 1.8 per cent is expected, although some economists think the number will come in even lower given the GST holiday.
Investors see a roughly 75% chance the BoC will cut its benchmark interest rate by 25 basis points to 3% at a policy decision on Jan. 29. A Reuters poll of economists last week found 80 per cent of them expecting a rate cut.
The bond market was quiet, with the Canadian 10-year yield down 1.3 basis points at 3.284%.
Reuters, Globe staff