Shanghai Shows Resilience After Long Holiday, S&P500 Futures Drop, Oil Pullbacks

• Chinese equities accelerate after the Chinese New Year holiday as optimism about economic recovery builds.
• BOJ Kuroda is confident in maintaining the 2% inflation target due to rising wages.
• The price of oil has resumed its downward journey as Russia has increased its oil supply.

The markets in the Asian domain are showing strength despite the cautious market sentiment. Chinese equities show resilience after the Lunar New Year holiday, while Japanese equities show marginal gains. S&P500 futures gave up all of Friday’s gains as investors have become risk averse amid the policy-inspired volatility from the Federal Reserve (Fed) this week.

At the time of writing, Japan’s Nikkei225 was up 0.20%, China’s A50 was up 1.60%, Hang Seng was up 1.06% and KOSPI was up 1.24%.

The US Dollar Index struggles to extend gains after recovering from 101.50 despite the risky market mood. The rate of increase in the USD index has capped at around 101.80 from last week as Fed Chairman Jerome Powell plans to raise interest rates at a lower rate. Inflationary pressures in the United States have eased significantly, giving the Fed some room to announce a modest rate hike.

Chinese stocks have risen dramatically amid optimism fueled by comments from China’s cabinet that said on Saturday: “It would promote a recovery in consumption as the main driver of the economy and boost imports,” state broadcaster CCTV reported per Reuters. The news highlights the cooling of global demand and recession concerns behind Chinese policymakers’ willingness to act.

Meanwhile, Japanese indices are gaining momentum as Bank of Japan (BoJ) Governor Haruhiko Kuroda expects the economy to reach a 2% inflation target on rising wages. The continuation of an accommodative monetary policy creates a condition for companies to raise wages. This could result in massive demand from individuals, keeping inflation close to desired targets.

On the oil front, the price of oil has resumed its downward journey after a pullback. A downward trend in oil prices emerged after Reuters reported that Russia’s oil shipments from Baltic ports would rise 50% in January from December levels to meet strong demand from Asia. Russia’s oil supply is accelerating despite the sanctions imposed by the Western cartel.