As the U.S. and Iran's "two-week truce" ends on the 21st (local time), attention is focused on the course of the war. Expectations had been high that the two countries were close to a cease-fire deal, but uncertainty is growing again as Iran reblocks the Strait of Hormuz. In addition, this week brings earnings reports from corporations that have driven the domestic stock market. In particular, attention is concentrated on whether SK hynix, scheduled to release results on the 23rd, can deliver an "earnings surprise."
Last week, the first cease-fire talks between the U.S. and Iran fell through, but the domestic stock market rose on expectations for a second round of talks. On the 13th, when the market first opened after news broke that the initial cease-fire talks had collapsed, the KOSPI index fell just 0.86%.
On the 16th, buoyed by cease-fire hopes, it climbed to 6,226.05. It was the first time in 33 trading days that the KOSPI closed above the 6,200 level. The KOSPI finished the week at 6,191.92, edging lower on the 17th ahead of the second round of talks between the U.S. and Iran.
This week, too, the course of the war appears to warrant close attention. The U.S.-Iran "two-week truce" ends on the 21st (local time). Accordingly, a second round of cease-fire talks is initially expected to take place before the 21st.
But the mood began to shift sharply on the 18th (local time). Iran's Islamic Revolutionary Guard Corps (IRGC) said it would close the Strait of Hormuz starting that evening, and Iran's deputy foreign minister also said a date had not been set for the second round of cease-fire talks with the U.S.
Ayatollah Mojtaba Khamenei, Iran's supreme leader, said in a statement, "Just as Iran's drones strike the United States and the Zionist criminals (Israel) like lightning, our valiant navy is also ready to deliver a new, bitter defeat to the enemies," issuing a hard-line message.
Earlier, U.S. President Donald Trump suggested he could end the truce if no cease-fire agreement with Iran is reached by the 22nd. Foreign media also reported that on the weekend of the 18th (local time), Trump convened a Situation Room meeting at the White House to discuss the reclosure of the Strait of Hormuz and Iran's negotiations.
However, resuming war is expected to be a burdensome choice for both sides. There is speculation the truce period could be extended.
Lee Sang-jun, a researcher at NH Investment & Securities, said, "Although President Trump denied it, restarting the war would be burdensome for both sides, so there is a high possibility the truce period will be extended," adding, "Measures similar to the U.S. closing the Strait of Hormuz after the first talks collapsed could reemerge, but we judge the overall market impact will be limited as investors interpret them as leverage to clinch a deal."
In Korea, major corporations' first-quarter earnings releases are lined up. The one to watch in particular is SK hynix's results scheduled for the 23rd. With Samsung Electronics having released record operating profit, the market expects SK hynix to also deliver an earnings surprise.
Lee Kyung-min, a researcher at Daishin Securities, said, "The key is whether operating profit tops 40 trillion won in the first quarter," adding, "If SK hynix also beats expectations following Samsung Electronics, expectations for the KOSPI's valuation appeal and momentum will be amplified."
Also pending on the 21st (local time) is the confirmation hearing for Kevin Warsh, the new chair of the Federal Reserve (Fed). The market is on high alert for the nominee's views on monetary policy, including the benchmark interest rate and the Fed's asset holdings.
Yoo Myung-gan, a researcher at Mirae Asset Securities, said, "At the hearing, nominee Warsh is likely to take a cautious stance that warns against inflation."
Although optimism about a cease-fire has grown, inflation concerns persist as international oil prices remain around the $90 level. By contrast, core consumption is likely to be dampened by uncertainty over the Iran talks and high oil prices.
Meanwhile, attention should also be paid to economic indicators to be released at home and abroad. On the 21st, the U.S. is set to release the March retail sales index. It is expected to rise by 1.2 percentage points from the previous month, but retail sales excluding the impact of higher energy prices are seen increasing by only 0.2 percentage points.
The researcher said, "The key is how well real retail sales hold up," adding, "Since the consumer price index (CPI) has not shown signs of energy price increases spreading to other items, concerns about U.S. stagflation are expected to ease quickly."
Also noteworthy on the 21st is Korea's exports through the 20th. That is because the correlation between the KOSPI's average daily export value and the KOSPI index is above 0.7.
The researcher said, "If the average daily exports through the 20th hit an all-time high, it will add thrust to the KOSPI index's upward momentum," adding, "Through the 10th, the growth rate of exports was 36.7%, with both total exports and semiconductor exports hitting all-time highs in value terms."