4 Canadian Stocks To Buy In May As GDP Rebounds

 | May 02, 2018 09:01PM ET

After a forgettable January, the Canadian economy made a rebound in February on the back of a recovery in oil extraction and auto production. Moreover, on Apr 30, President Donald Trump said that the relief for steel and aluminum tariffs for neighbors Canada and Mexico will now be extended till Jun 1, instead of May 1.

Additionally, Canada is clearly making efforts to extend these tariff exemptions after the Justin Trudeau government recently approved new measures to handle dumping of steel by China. The United States has already imposed anti-dumping steel tariffs on China last month and with its northern neighbor supporting the cause, things seem to be going uphill now.

Canada’s lack of aggression on these issues in recent times and the prime minister’s willingness to talk about negotiations regarding the NAFTA has clearly brought focus on Canadian stocks. Hence, investing in stocks gaining from a thriving Canadian economy is an outstanding option.

Canada GDP Bounces Back in February

According to official data from the Statistics Canada (StatCan), after declining 0.1% in January real GDP rose by 0.4% in February to a seasonally adjusted rate of 1.77 trillion Canadian dollars or $1.38 trillion. Out of the 20 key industries, 15 registered increases. February’s GDP growth was also higher than Royal Bank of Canada’s (RY) economists’ forecast of a 0.3% rise.

Per StatCan, the February GDP growth was mainly due to a “rebound in the mining and oil and gas extraction sector.” Overall, the oil and gas extraction and mining sector advanced 2.4% in February, with the conventional oil and gas extraction sector, conventional oil extraction sector, and mining sector increasing 2.9%, 3% and 1.9%, respectively.

Additionally, transportation equipment gained 2.7% giving a boost to the durable manufacturing sector, which in turn led the manufacturing sector to advance 1%. Additionally, the construction sector increased 0.7% after residential construction rose 1.3%. Increase in both construction and manufacturing sectors also contributed to GDP growth in February.

Trump Administration Extends Tariff Relief for Canada

In March, Trump finally signed the tariff plan into law, slapping tariffs of 25% on steel imports and 10% on aluminum imports from other countries. However, Canada was one such country which was exempted from the new U.S. tariffs. This move is expected to benefit Canada, which is the biggest steel exporter and one of the key aluminum exporters to the United States.

Temporary exemptions for countries like Canada were to expire on May 1. However, in a statement on Apr 30, the Trump administration extended “negotiations with Canada, Mexico, and the European Union for a final 30 days.”

Back in March, Justin Trudeau said that United States’ tariff move “makes no sense.” However, recently, the Trudeau government has sported a stance a similar to the the United States.

The country’s government has stated that it is focused on “preventing the arrival of dumped steel or aluminum from the global markets, specifically China.” While, talking about walking away from the NAFTA, Trudeau said that Canada is “always been willing to sit down” and adopt a constructive approach regarding NAFTA negotiations.

4 Canadian Stocks to Buy Now

Following a strong rebound in GDP in February and extended exemption from U.S. steel and aluminum tariffs, Canadian stocks are expected to garner investor attention. Additionally, a recovery in the country’s mining and oil extraction sector and an increase in goods-producing industries have also given a boost to investor sentiment.

In this context, we have selected four stocks that are expected to move upward following these developments. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see Zacks Investment Research

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