04:23 PM EDT, 08/22/2025 (MT Newswires) -- The Toronto Stock Exchange was up for a third-straight day and its second-straight record close on Friday as Canada removed counter tariffs on U.S. goods in a move to deflate trade tensions between the two nations, while BMO Economics is now calling for a total of three interest-rate cuts by next spring.

Also boosted by elevated commodity prices, the resources heavy S&P/TSX Composite Index surged 277.70 points, or 1%, to a record finish of 28,333.13, with most sectors higher. The biggest gainers were Base Metals and Battery Metals, both up 3%, Info Tech, up 2.6% and Energy, up 2.3%.

Going in to Friday's session, month to date the TSX was up 2.92% and year to date was up 3327.49 points or 13.46%, according to Dow Jones Market Data, FactSet

Among individual stocks, story of the day came from the resources sector with Cenovus Energy ( CVE ) agreeing to acquire MEG Energy ( MEGEF ) in a cash, stock and assumed-debt deal valued at $7.9 billion. With this move, Cenovus appears to have trumped a prior unsolicited bid for MEG from Strathcona Resources ( STHRF ) . Cenovus closed up 7.1%, MEG rose 1.2%, and Strathcona rose 0.2%.

National Bank has upgraded Cenovus to Outperform from Sector Perform, with its Target raised to $28.00 from $24.00.

On the economics front, Douglas Porter, Chief Economist at BMO Capital Markets, in his weekly 'Talking Points' note noted Canada is removing a long list of retaliatory tariffs on U.S. goods. Basically, Porter said, the only items still facing Canadian tariffs will be metals and some autos, largely mirroring U.S. measures. Porter noted this happened a day after the first conversation between Prime Minister Carney and President Trump in weeks, and he said it is an important step.

According to Porter, the direct implications for the Canadian economy are that it will: take some pressure off specific CPI items (e.g., groceries, sporting equipment), which could help shave core inflation back below 3%, and also that it will further cut into expected tariff revenues. Porter recalled that the Liberal election platform had been based on annual tariff revenues of $20 billion. "We are now looking at a fraction of that amount, introducing yet more pressure on the fiscal outlook."

Porter said: "Our longstanding view has been that the inflation threat from the trade war was a tad overblown, for Canada and for the U.S., albeit for different reasons. For the States, its unrivalled market power means that the Administration is not fully offside for asserting that companies will ultimately eat some of the tariffs. For Canada, the two big drivers of potential trade war inflation have vapourized, the retaliatory tariffs, which weren't that fierce to begin with, have been further declawed; and, the Canadian dollar is 3%-to-4% stronger than when the trade war first erupted, not weaker, even with its recent sag."

According to Porter, the "back down" on Canadian retaliation should, thus, fully quiet the talk of trade war led inflation, alongside this week's tempered CPI reading for July. He noted the latter revealed that the three-month core inflation trend eased to 2.4%, its first trip below 3% since last fall. Porter said this opens the door to further rate cuts by the Bank of Canada. He noted while a move in September remains a bit of a long shot, markets peg the odds at about 1 in 3, a move in October is seen as likely, and there could be more to come. Porter added: "We continue to lean to the low side, calling for a total of three cuts by next spring, which would take rates just a touch below the low end of neutral. But given the more benign trade-related inflation risks and a softening job market, we believe that below neutral would ultimately be entirely appropriate."

Of commodities, West Texas Intermediate crude oil closed higher on Friday, rising for a third day on high summer demand even as supply is on the rise. WTI crude for October delivery closed up $0.14 to settle at US$63.66 per barrel, while October Brent oil was last seen up $0.16 to US$67.83.

Gold prices were up late afternoon Friday as the dollar fell sharply following a dovish speech from Federal Reserve Chair Jerome Powell indicating the central bank is ready to begin lowering interest rates again. Gold for December delivery was last seen up $36.00 to US$3,417.60 per ounce, sticking within the narrow range it has mostly traded within since April.

Wells Fargo Investment Institute noted investors have read in a lowering of U.S. interest rates after Powell's speech. On implications for investors, and of note for those who invest across North America, WFII said: "We believe that surprises, either from policy or from economic data, could trigger episodic periods of volatility, especially as the economy slows. It added: "We favor extending tactical positioning in areas that we believe should balance opportunity against short-term volatility risk."