Citi Flags Rising Short-Squeeze Risk in DAX as US Flows Stay Strong

On 7 July 2026, Citi warned that European equities face mounting short-squeeze risk as sentiment improves, energy fears fade, and positioning grows crowded. The bank singled out Germany’s DAX as the market most likely to deliver squeeze-driven upside in coming weeks. US risk appetite and short covering continue to underpin equities, though exposure has become increasingly concentrated, especially in the already stretched Russell 2000. In Asia, South Korea’s KOSPI has rebuilt bearish bets while Hong Kong’s Hang Seng has been lifted by short covering. Citi concludes that incremental squeeze potential now outweighs the threat of broad de-risking, implying near-term support for major equity indices.