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Investing.com -- Positioning in global equity markets rebounded sharply following the recent U.S.-China trade truce, according to Citigroup (NYSE:C) strategists. The recovery was most visible in U.S. indices, where improved sentiment around tariff negotiations spurred new risk flows and short covering.
Positioning in the S&P 500 and Nasdaq returned to bullish territory, driven by a combination of long accumulation and unwinding of shorts. Strategists led by Chris Montagu highlighted that “U.S. equity positioning increased for large-cap indexes as new risk flows and short unwinds dominated weekly position activity.”
Nasdaq, in particular, saw positioning bounce significantly, though Citi noted that notional levels remain well below extended thresholds.
In contrast, small-cap positioning in the Russell 2000 saw less movement despite six consecutive weeks of gains, reflecting waning momentum.
In Europe, equity positioning also improved. EuroStoxx, FTSE, and European banks all recorded gains, while DAX eased slightly but held net bullish.
Citi notes that European banks stood out with “prominently bullish and elevated” positioning.
“In addition to recent strong sector earnings performance, a sustainable longer-term earnings outlook alongside higher dividend yields is increasing the appeal for Banks and being reflected in current positioning,” the strategists said.
“European Banks ETF flows mirror this on-going bullish trend, with ETF positioning and profit levels extended for European Banks,” they added.
Asia saw a broad-based improvement, with positioning climbing for the second week in a row, particularly in China.
According to Citi, China’s A50 index positioning has sharply returned to elevated levels, with normalized scores for the index outpacing the recovery in market prices.
All tracked indexes in the region now show bullish positioning except the Nikkei, where sentiment remains near neutral amid lingering U.S.-Japan trade uncertainty and weaker domestic growth signals.
Montagu also pointed out that legacy short positions across several indices are now offside, especially in EuroStoxx, adding that “the combined position and loss setup could lead to a near-term short-covering rally, potentially fueling further upside.”