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Investing.com -- Bullish investor positioning in U.S. equities rose sharply last week as geopolitical tensions between Iran and Israel de-escalated, lifting sentiment across risk assets, according to Citi’s new weekly report.
The U.S. saw the most pronounced jump, with both the Nasdaq and Russell 2000 positioning returning to extended levels.
“Nasdaq positioning at the 98th percentile (3-year averaging),” Citi strategists led by Chris Montagu highlighted.
The S&P 500 also advanced in positioning terms, though remains below the other two benchmarks.
The recent rally has driven long position profits near 5%, lifting short-term profit-taking risks, which may hinder further upside, the strategists said.
The backdrop for the repositioning was “a tempered retaliation from Iran… after the U.S. directly intervened in the Iran/Israel conflict,” the report noted. Brent crude prices fell back to around $67 per barrel, helping to ease broader risk concerns.
In contrast, positioning in Europe remained muted. Despite modest gains in the DAX and Euro Stoxx indices, net positioning was little changed, with Euro Stoxx “near neutral” and gross levels falling to long-term lows.
Citi attributed this to continued de-grossing and sluggish flows, which have widened the gap between EuroStoxx and S&P 500 positioning.
Meanwhile, Asia largely followed the U.S. trend, with all major indices seeing increased bullish flows. The China A50 and Hang Seng led gains, partly supported by “news of progress on a U.S.-China trade deal.”
“Both A50 (+1.8) and Hang Seng (+2.3) saw new risk flows, and the A50 had the second largest rise in positioning levels across the indices tracked,” the report said.
KOSPI and Nikkei also advanced, though Citi cautioned that “positioning and profit levels for KOSPI have been elevated in recent weeks and continues to look risky.”