Nikkei225 stands out in development on BOJ’s new guidance, oil recovers

  • The positive development of talks on the new leadership of the BoJ supports Japanese stocks.
  • Chinese indices failed to gain strength despite upbeat data on GDP, industrial production and retail sales.
  • Oil prices recovered ahead of OPEC’s monthly report.

Markets in the Asian domain are showing mixed signals amid the respective developments. Market sentiment prompted caution as U.S. Treasury yields extended their gains early Tuesday. The yield on 10-year US Treasuries jumped to nearly 3.54%. S&P500 futures extended their losses amid uncertainty over the extended weekend. While the US Dollar Index (DXY) is struggling to save the 102.00 support.

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

Volatility in Japanese stocks was widely expected as uncertainty over the Bank of Japan’s (BOJ) first monetary policy for CY2023. Investors are eagerly waiting for a comment on the term of exit from a decade of ultra-loose monetary policy. However, headlines from Reuters that a new BOJ governor nominee is likely to be introduced to parliament on February 10 have injected fresh blood into Japanese stocks. Career c.bankers Amamiya, Nakaso and Yamaguchi are considered the main candidates to succeed current BoJ Governor Haruhiko Kuroda.

Meanwhile, Chinese indices failed to rally despite upbeat gross domestic product (GDP) data. In the fourth quarter of CY2022, China’s economy grew by 2.9% year-on-year, while the street expected growth of 1.8%, down from the previous edition’s 3.9%. On a quarterly basis, the economy remained stable but managed to avoid a downturn as investors expected growth to slow to 0.8%.

In addition, annual industrial production (December) was reported to be a stronger-than-expected 1.3% versus expectations of 0.5%, but lower than the previous announcement of 2.2%. Annual retail sales fell by a lower-than-expected 1.8% versus the estimate of -7.8%.

On the oil side, oil prices have recovered dramatically from $79.00 as the reopening of reforms in China will generate clean liquidity, which is expected to boost commodity growth going forward. Moreover, investors await the monthly report from the Organization of the Petroleum Exporting Countries (OPEC), which could provide signs of further oil supply cuts.

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