Asian Stock Market: Shanghai shows resilience after a long holiday, S&P500 futures drop, oil retreats

Markets in the Asian domain are showing strength despite cautious market sentiment. Chinese stocks are showing resilience after the Lunar New Year holidays, while Japanese equities are displaying marginal gains. S&P500 futures have surrendered their entire gains recorded on Friday as investors have turned risk-averse amid Federal Reserve (Fed)’s policy-inspired volatility, which is scheduled this week.

At the press time, Japan’s Nikkei225 added 0.20%, China A50 soared 1.60%, Hang Seng tumbled 1.06%, and KOSPI plunged 1.24%.

The US Dollar Index struggles to extend gains after recovery from 101.50 despite the risk-off market mood. The upside in the USD Index is capped at around 101.80 from the last week as Fed chair Jerome Powell is set to hike interest rates with a smaller rate. Inflationary pressures in the United States have trimmed significantly, allowing the Fed to announce a modest rate hike.

Chinese stocks have soared dramatically amid optimism boosted by commentary from China's cabinet that said on Saturday, “It would promote a consumption recovery as the major 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 the readiness of China policymakers to act.

Meanwhile, Japanese indices are collecting strength as Bank of Japan (BoJ) Governor Haruhiko Kuroda expects the economy to achieve a 2% inflation target through rising wages. The continuation of easy monetary policy creates a condition that allows firms to hike wages. This might result in a bumper demand from individuals, which would keep inflation nearby the desired targets.

On the oil front, the oil price has resumed its downside journey after a pullback move. Downside bias in the oil price emerged after Reuters reported that Russia’s oil loadings from its Baltic ports were set to rise by 50% in January from December levels to address the strong demand coming from Asia. Russian oil supply is accelerating despite the sanctions by the Western cartel.