12:39 PM EST, 01/21/2025 (MT Newswires) -- The Toronto Stock Exchange is up 94 points at midday, led by gains in technology(+1.2%).

Energy, down 1%, is the biggest decliner. Oil prices weakened early on Tuesday as Donald Trump declared a national energy emergency on the first day of his return to the U.S. presidency and postponed to Feb. 1 plans to immediately impose a 25% tariff on imports from Canada, which supplies 60% of U.S. oil imports.

Gold prices weakened early on Tuesday even as the dollar was sharply lower. Also, natural gas futures fell as forecasts see milder weather on the way for most states.

After President Trump last evening reiterated the intention to impose tariffs on Canada by February 1, TD Economics noted that although border security was cited as a catalyst for the latest remarks, the U.S. President has also argued that "the United States can no longer suffer the massive trade deficits that Canada needs to stay afloat," claiming the U.S. subsidizes Canada to the tune of US$200 billion annually. "It's unclear where this number is derived," TD said, before adding: "In any event, rather than a subsidy, the U.S. trade deficit is a by-product of U.S. economic outperformance relative to other countries." According to TD, Canadian's should brace for a long period of 'deal making'.

In a separate note, TD noted today headline Canada CPI inflation fell a tenth to 1.8% year-on-year in December, pushed lower by the temporary GST/HST break that went into effect mid-month. The Bank of Canada's preferred 'core' inflation measures were down slightly at 2.5% y/y on average, down from 2.6% in November.

On key implications, TD said December's inflation data came in line with the BoC's expectations for inflation to average close to 2%. Despite the tax cut driven dip in headline inflation, TD added, core inflation pressures have picked up over the past three months, suggesting that inflation readings are likely to move up a bit in the months ahead. According to TD, this will give the Bank of Canada reason to adopt a more gradual pace of interest rate cuts this year. TD expects a quarter point cut at every other decision in 2025.

TD expects the BoC to cut rates a quarter point next week, which would put interest rates further into 'neutral' territory -- "a stance we think is warranted given relatively soft demand backdrop for Canada's economy."

For its part, CIBC said Canada's inflation data is only going to get harder to dissect in January, with the full month impact from the GST/HST tax break taking hold. It added any news on the tariff front will also "muddy the picture" for inflation ahead. However, CIBC noted, through the volatility it still appears that core price pressures are low enough, and the economy weak enough, to justify a 25bp reduction in interest rates from the BoC next week.

In other economics news, the Teranet-National Bank House Price Index showed house prices ended the year on a strong note. The composite index rose by 0.8% in December, the sixth consecutive monthly increase and a larger rise than the 0.7% recorded the previous month. As a result, prices have grown by a cumulative 2.9% since the BoC's first rate cut in June and are now just 0.3% below the record level reached in April 2022.