US Market Open: Markets Shift Focus to Earnings as Geopolitical Risks Ease

US Market Open: Markets Pause as Geopolitical Risks Ease Ahead of Earnings Season

US equity futures are pointing to a slightly softer open following Thursday's strong rally. The Nasdaq is underperforming, largely due to positioning ahead of SK Hynix's highly anticipated US ADR debut, while the S&P 500 and Russell 2000 are holding up relatively well.

Although markets remain sensitive to geopolitical headlines, investors are increasingly shifting their focus back toward fundamentals. With the second-quarter earnings season set to begin next week, attention is gradually turning away from macro uncertainty and toward corporate results, starting with the major US banks.

Geopolitical Tensions Cool, but Risks Remain

The tone across markets has improved after a relatively quiet night in the Middle East.

According to both CNN and Axios, regional mediators are working to bring the United States and Iran back to the negotiating table. While no agreement has been reached, the absence of fresh military escalation has helped calm investor nerves after several volatile sessions.
Investors are still watching developments closely, but for now the market is assigning a higher probability to continued diplomatic efforts than to a broader regional conflict.

Oil Gives Back Part of Its Risk Premium

That improving geopolitical backdrop is reflected in the oil market.

Brent crude is modestly lower and trading around the middle of this week's range as traders wait for either renewed negotiations or fresh military developments. The International Energy Agency also added a slightly bearish tone after lowering its 2026 oil demand forecast while highlighting stronger supply growth and continued oil shipments through the Strait of Hormuz.

As long as global energy supplies remain largely unaffected, investors appear comfortable removing some of the geopolitical premium that had built into crude prices earlier this week.

Currency Markets Focus on Japan

The US dollar is trading slightly weaker against most major currencies.

The Japanese yen is leading gains after Finance Minister Katayama proposed measures aimed at encouraging pension funds to increase investments in domestic assets. The comments supported both Japanese government bonds and the yen, although investors remain cautious about whether such proposals can ultimately be implemented.

Equities Shift Back Toward Company-Specific Catalysts

European markets are trading broadly steady, while US futures suggest a mixed start to the session.

Technology shares are underperforming ahead of SK Hynix's US listing, while communications and travel stocks are among the strongest performers in Europe. In Asia, semiconductor stocks continued to lead gains, with South Korea outperforming as investors positioned for the SK Hynix debut.
The relatively muted reaction across global equity markets suggests investors are becoming more comfortable looking through geopolitical headlines unless they materially alter the economic outlook.

Looking Ahead: Earnings Season Takes Centre Stage

While geopolitical developments remain an important source of uncertainty, markets are preparing for another major shift in focus.

Second-quarter earnings season officially gets underway next week, led by the major US banks. Investors will be watching closely for commentary on loan growth, consumer spending, credit quality, investment banking activity and capital markets revenues. Just as importantly, management teams will provide updated guidance on the economic outlook, offering one of the first comprehensive reads on how corporate America is navigating the current environment.

With equity markets trading near record highs, expectations have risen considerably. Strong earnings and constructive guidance could provide another leg higher for equities, while disappointing results may prompt investors to reassess current valuations.

What to Watch Today

Today's calendar is relatively light, with the Canadian employment report representing the main macro event. Delta Air Lines will also report earnings, offering an early indication of consumer demand and travel trends ahead of next week's broader earnings season.

For today's session, markets remain focused on one key question: can diplomatic momentum continue in the Middle East? As long as tensions remain contained and energy markets stay stable, investor attention is likely to continue shifting toward company fundamentals and the upcoming earnings season.

Philip J Papageorgiou - Head of Investment Research

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