The more positive market vibe over recent weeks speaks volumes about how investors are de-emphasizing downside risks.

US equities traded higher on Wednesday. S&P500 closed 1.7% higher following similar gains in Europe. Energy stocks led the US equity gains as oil rose 4%.

Easing in mobility restrictions hence recovery hopes might have helped as well, with the Wall Street Journal reporting, all 50 US states have now reduced at least some lockdown restrictions.

US10Y treasury yields fell 1bp to 0.68%, as the Treasury’s issue of a 20-year bond, the first since 1986, was met with huge demand. And why not as if risk premium rises in the backend, the Feds will step in and adjust the YCC lower.

But what is keen for the stock index investors is the tape is gradually exhibiting emerging signs of cyclical leadership. Sure, the tape remains defensive, but from a thematic perspective, China-exposed names continue to outperform with demand seen in miners, luxury, and selective chemical names.

Combing the enduring investor demand for US equity index futures as sectors within the S&P 500 are exhibiting emerging signs of cyclical leadership; this is hugely bullish for stocks and risk assets in general.

And while CTA accounts did not drive the recent bout of volatility as stocks fell, that was retail that bailed, but if there is a break higher, secure CTA buying should kick in. Risk control accounts are slowly increasing exposure as realized volatility declines.

FOMC minutes suggest the US Federal Reserve is game planning for more persistent pandemic effects. The minutes show growing concerns about persistent adverse effects from the virus, but this aligns with the market consensus of diminished recovery expectations for the US economy over the coming quarters.

But given that everyone is starting from a low point, positive surprises will be consumed in earnest

Japan has reached its worst point since the start of Abenomics in 2013. Whether Abe is re-elected as PM, it is critical for the monetary policy outlook. If Abe resigns, most likely BoJ Governor Haruhiko Kuroda will step down as well, precipitating a significant shift in the monetary policy.

Australian trade tension continues to lurk and on the surface are worrisome given Australian trade linkages with China, but provided the disputes remain at the agricultural level as opposed to escalating to iron ore, the local market is not getting to wound up about this nascent political imbroglio at this stage.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp