Nikkei225 stands out for development versus new BOJ leadership, oil recovers

  • The positive development of rumors about the new BoJ leadership is supporting Japanese equities.
  • Chinese indices failed to find strength despite positive data on GDP, industrial production and retail sales.
  • Oil prices rallied ahead of OPEC’s monthly report.

Markets in the Asian domain are showing mixed signals in their respective developments. The market mood turned cautious as US Treasury yields extended their gains early Tuesday. The yield on 10-year US Treasuries jumped close to 3.54%. S&P500 futures extended their losses amid uncertainty from the extended weekend. While the US Dollar Index (DXY) is struggling to salvage the support at 102.00.

As of press time, Japan’s Nikkei225 was up 1.23%, ChinaA50 was down 0.64%, the Hang Seng was down 0.90% and Nifty50 was up 0.64%.

Volatility in Japanese equities was highly expected as uncertainty for the CY2023 Bank of Japan (BOJ) 1st Monetary Policy is on the rise. Investors are eagerly awaiting commentary on the expression of the exit from the 10-year ultra-expansionary monetary policy. However, Reuters headlines that the new BOJ governor is likely to be introduced to parliament on Feb. 10 breathed new life into Japanese equities. Career bankers Amamiya, Nakaso and Yamaguchi are seen as the best candidates to succeed current BoJ governor Haruhiko Kuroda.

Meanwhile, Chinese indices failed to find strength despite upbeat gross domestic product (GDP) data. In the fourth quarter of 2022, China’s economy grew 2.9% year on year, while the road expected a 1.8% expansion, lower than the previous release of 3.9%. On a quarterly basis, the economy remained stable but managed to avoid contraction as investors expected a 0.8% decline.

Trade deals between the United States and China set a new record of $694.4 billion, fading fears of any hard feelings between the giant economies, Brooklyn said, reported by Bloomberg. Also, according to Bloomberg, the US Treasury Department said late Monday that US Treasury Secretary Janet Yellen will hold her first face-to-face meeting with Chinese Vice Premier Liu He on Jan. 18 in Zurich. The pair “will exchange views on macroeconomic developments and other economic issues.”

Aside from that, annual industrial production (Dec) was reported stronger than expected at 1.3% versus expectations of 0.5%, but lower than the previous release of 2.2%. Annual retail sales recorded a less-than-expected contraction of 1.8% against the estimate of -7.8%.

On the oil front, oil prices have rallied sharply from $79.00 as China’s reopening reforms will produce pure liquidity, which should trigger a commodity rally ahead. Also, investors await the monthly report from the Organization of the Petroleum Exporting Countries (OPEC), which could provide signs of further oil supply compression.

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