04:23 PM EST, 01/20/2025 (MT Newswires) -- The Toronto Stock Exchange rose for a fifth-straight session on Monday after Donald Trump backed off a pledge to impose punishing tariffs on Canada, Mexico and China.

The S&P/TSX Composite Index closed up 103.66 points to end at 25,171.58, the highest since Dec.13. The biggest gainers were Energy, up 2.31%, followed by Base Metals, up 0.94%. Financials were the biggest decliner, down 0.17%, followed by Information Technology, down 0.09%.

Reports said Trump will not impose the 25% tariff he promised to immediately place on Canada and Mexico, as well as a 60% levy on imports in China after being sworn in as U.S. President. Instead, the newly inaugurated 47th President will direct federal agencies to examine persistent trade deficits and unfair trade practices.

Oil prices fell in Monday electronic trade with markets closed for the Martin Luther King Day holiday after Trump backed down on his threatened tariffs, while issuing an executive order to support U.S. oil production, already at record levels. West Texas Intermediate crude for February delivery was last seen down US$0.99 to US$76.89 per barrel, while March Brent crude traded US$0.89 lower to $79.90.

Gold edged down late afternoon. Gold for February delivery was last seen down US$16.90 to US$2,731.80 per ounce.

Alongside easing tariff fears, the TSX was buoyed by the release of a survey that showed rate cuts had driven cautious optimism among Canadian businesses in the fourth quarter and also by expectations around December CPI data due out on Tuesday.

According to TD Economics, today's Bank of Canada Business Outlook Survey (BOS) showed Canadian business sentiment remained below its historical average though it saw signs of emerging optimism in the fourth quarter. It noted the parallel Canadian Survey of Consumer Expectations (CSCE) showed consumers' sentiment also remained subdued, but showed modest improvement compared to the previous quarter.

In looking at key implications, TD said on the business side the positive news is that investment intentions have picked up, especially in the energy sector and rising expectations for future sales suggest that businesses remain on solid footing as they head into 2025.

On the consumer side, TD said, a substantial reduction in interest rates and ongoing easing of price pressures appear to have bolstered sentiment. Most importantly, it noted, consumer inflation expectations have finally aligned with the BoC's target of 2%. On balance, TD added, there remains a case for the BoC to lower its policy rate at the January 29 meeting. "Additionally, the Monetary Policy Report accompanying the decision should offer insights into how the Bank is assessing trade-related uncertainties that are likely to exert a headwind on its growth outlook."

For RBC, the message from businesses that participated in the Q4 BoC quarterly outlook survey were "a healthy mix of a thawing in the weak demand conditions as interest rates drop, and broadly slowing inflation pressures".

It said: "As much as the pick-up in sales outlooks is welcome, it doesn't mean the Bank of Canada is done with supporting the economy. We continue to expect the central bank will need to keep lowering interest rates to 2%, to ensure the early signs of strengthening in demand can be sustained and inflation doesn't undershoot the central bank's target."

Elsewhere, Rosenberg Research noted the BoS Indicator rose by a "solid" +1.1 points to -1.2, "still net-pessimistic, but the best reading since Q1 2023". For bond markets, the research said, there was something for both the bulls and the bears to latch on to. It added: "Businesses are clearly responding optimistically to the lower interest rate environment and planning production and investment adjustments accordingly, but their inflation and wage growth expectations remain muted, giving the BoC room to ease further. And, crucially, the sample appears to have missed the escalation in tariff fears."

On inflation, RBC is 0.3 percentage points below consensus, looking for a "very soft" December print with a 0.7% monthly decline for headline CPI, taking the annual rate to 1.5%. It said the GST holiday that started mid-December will drive the lower headline print. RBC noted the holiday ends in mid-February, with an offsetting effect (increase) expected around that time. It also noted the CPI report comes a week before the January 29 meeting where it expects the BoC to cut the policy rate by 25bp.

Still on inflation, RBC said median and trim measures should moderate to a 0.2% m/m increase in December after 0.3% m/m rises in October and November. It noted the core categories are adjusted to exclude the impact of indirect taxes, so are not directly affected by the tax holiday. RBC Economics points out that mortgage interest costs (MIC) continue to disproportionately impact headline CPI and core measures, noting that YoY rates would have been 0.5% lower on average in November without MIC to 2.2% and 2.1%, respectively.