Faced with geopolitics and trade war, US companies in China report record-low new investment plans
The companies are also challenged by China's slowing economy, where weak domestic demand and overcapacity in local industries are eroding profitability for the Americans.
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Yahoo
8 minutes ago
- Yahoo
Why a 'garbage rally' powered by junk stocks could explain quant hedge funds' no good, very bad summer
Quant hedge funds have been losing money since the start of June. The causes are unclear, though execs, traders, and banks have pointed to a few factors. Wednesday was another rough day, as the average quant lost 0.8%, according to Goldman Sachs. As the fundamental investing world marvels at another potential bubble made up of meme stocks and retail traders, quant hedge funds are trying to solve a much more complex problem. The smartest people at the smart money firms have been on a weekslong losing streak starting at the beginning of June, with firms like Qube, Two Sigma, and Point72's Cubist suffering losses over that time. Wednesday was another rough day of trading for many funds as the average quant lost 0.8%, according to Goldman Sachs. The bank's prime brokerage unit said July was on track to be the worst month in five years and pointed to similar factors as it did earlier in the week: A momentum sell-off, crowded trades, and high volatility in certain stocks. Business Insider previously reported that quant firms have been trying to pinpoint the cause of the steady-drip losses that have eroded a hot start to the year in systematic trading. Goldman isn't the only firm that's begun to wrap its head around what's happening. Computer-run managers have come up with theses, found parallels to past markets, and are even planning for a quick rebound. A belief taking hold is that broader market calamity is unlikely to spread, as the sources of pain aren't fundamental market weakness or a lurking economic maelstrom, but rather the opposite: a surprisingly strong economy that has flooded the markets — and questionable stocks — with liquidity that happened to catch quants wrong-footed. Dark Forest Technologies founder Jacob Kline wrote in a Friday note to investors that the current scenario is "not at all like 2007," when forced deleveraging inflicted rapid losses across the systematic space. Kline, who was previously on the investment committee at Bridgewater, said this summer's swoon is a byproduct of "what we politely call a 'garbage rally.'" He theorizes that the resurgence in heavily shorted junk stocks in recent weeks has forced some smaller quant firms to sell their positions, adding to the pain for everyone still holding on. "It's a bad month but not a crisis; the drivers are atypical but not surprising," the note reads. It's not Sydney Sweeney and the memestock crowd Don't give too much credit to Sydney Sweeney and the memestock crowd. They were late to the ball game. One executive at a multimanager fund involved in quant strategies said some large funds started noticing losses before June. Weeks before Kohl's and American Eagle became retail darlings, some micro-cap stocks and thinly traded Chinese names "had been running for three weeks doing silly things." "There's no underlying malady. No COVID. No great financial crisis," the multimanager exec said. He ascribes blame largely to a broader surge in market liquidity and risk appetite, a result of positive macroeconomic developments that began burbling months ago. A "peculiar set of circumstances" preceded the quant bleeding, according to Kline. The broader stock market rally heading into June was largely driven by retail and systematic trend-following. Hedge funds had relatively low net exposure — but they had been hedging the quality stocks by shorting weak ones, which was profitable. The market reached all-time highs in June, and with prices so rich, hedge funds stopped adding to those high-quality stocks but also stopped betting against the weak ones. Removing their short positions boosted "garbage" stocks, which attracted the attention of retail traders and meme stock enthusiasts, driving those positions up further. Because quants, in simplistic terms, use their mathematical firepower to "sort good from bad," as Kline put it, this rally in low-quality companies set many of them up for pain. "Quants are generally going to be on the other side of that kind of arbitrary move," Kline said. Strategies that jump on short-term trends "may be exacerbating" the surge, said Antoine Haddad, founder of $1 billion Bainbridge Partners, a multistrategy hedge fund with quant portfolio managers. This includes "AI-driven algos too," he said. The big-picture driver of this frenzied trading is the strong macroeconomic backdrop — low inflation, muted tariff impact, lack of rate hikes from the Federal Reserve — which has attracted more money into the market. During Covid and the original memestock craze four years ago, the market was awash in liquidity, and money gravitated to odd places, including seemingly worthless stocks — not to mention NFTs, cryptocurrencies, and SPACs. What's happening in 2025 is an echo, similar but far less intense. Another wrinkle and outgrowth of the increasing liquidity and risk appetite is the thaw in equity capital markets, which "have lit up like a Christmas tree," the multimanager exec said. While capital raising was dead much of this year, companies in June began raising money again through initial public offerings, follow-on raises, and convertible bonds, all of which "accelerated towards the end of the quarter, as global issuers and investors gained confidence amid a market rebound," according to Morgan Stanley's mid-July earnings call. This allows companies, "garbage" or otherwise, to improve their prospects by injecting their coffers at attractive valuations, potentially boosting their stock price as well. While many hedge funds closely monitor such activity, it's not traditionally the bailiwick of quants. "Quants don't sit in that business and they don't see that flow," the multimanager exec said. All eyes on the industry's largest quant funds Understanding the source of the quant carnage is one question. Identifying when the pain will abate is equally important. One trader who works at one of the industry's largest quant funds told BI that the actions of the biggest firms will be the most significant factor over the next week. If these funds are forced to sell, then there could be serious pain that could impact everyone from Fidelity mutual funds to Robinhood retail traders. "Some small players don't have a choice but to capitulate," the multimanager exec said, adding that the larger firms know that if a major peer cuts its exposure, "then it becomes a bigger contagion and gets out of hand." This hasn't happened yet, and some are betting that the bigger players will just sit tight. The size of the funds, the pain tolerance of their executives, and the trust they have in their models is where the quant heavyweights have the ability to shine. They either have investor capital locked up for years or a giant horde of internal money — meaning they can withstand losses for longer, especially if they anticipate a bounceback. Dark Forest compared the situation to the end of 2023, when some smaller quants were stung by the Federal Reserve's signalling that lower rates may be coming. This increase of liquidity in the stock market caused a similar surge in stocks that quants were either short or not invested in. Those who "pulled back missed out badly," while funds that held firm saw substantial gains in the following months. "Like 2023, the losses are big enough to where they are inducing the weaker hands to delever, which is exacerbating the losses this week," the note reads. But this time around, the "strong hands" will let their models continue because "the ARKKs of the world are unlikely to keep outperforming the market by 10% a month," Kline said, referring to the innovation-focused ETF managed by Ark Investment Management. "We think strong hands should be levering up into this headwind," the note concluded. Another executive of a small quant fund said they planned to ride out the "froth in sexy sectors." "We are not going to suddenly switch our models over this," he said. "It had been a great year before the summer. Those conditions can come back." The multimanager exec believes the worst is over. It can take time for markets to recalibrate the junk stocks, but "now that everyone is writing about it, we're probably done." Read the original article on Business Insider
Yahoo
8 minutes ago
- Yahoo
CGTN: President Xi Jinping calls on China, EU to provide more stability, certainty for world
Chinese President Xi Jinping met with European Union leaders during their visit to Beijing for the 25th China-EU Summit on Thursday. CGTN published an article exploring China-EU relations in two-way trade and investment, emphasizing the need for both sides to embrace multilateralism, openness and cooperation to bring greater stability and certainty to the world. BEIJING, July 26, 2025 (GLOBE NEWSWIRE) -- Fifty years ago, China-Europe trade was a trickle. Now, as the two sides mark half a century of ties, a single day's trade equals what they exchanged in the entire year when relations were first established. Noting that this year marks the 50th anniversary of diplomatic ties between China and the European Union, Chinese President Xi Jinping said on Thursday that China-EU relations have come to another critical juncture in history. There are no fundamental conflicts of interest or geopolitical contradictions between China and the EU, Xi told European Council President Antonio Costa and European Commission President Ursula von der Leyen at the Great Hall of the People in Beijing. "The current challenges facing the EU do not come from China," he said, adding that the fundamentals and prevailing trend of China-EU relations featuring cooperation over competition and consensus over differences have remained constant. Xi put forward three proposals for the future of China-EU relations: both sides should uphold mutual respect and consolidate the positioning of their relations as partnership, embrace openness and cooperation while properly managing differences and frictions, and practice multilateralism and uphold international rules and order. Trade and investment At Thursday's meeting, the Chinese president said the China-EU economic and trade relationship is by nature complementary and mutually beneficial and can indeed achieve dynamic equilibrium through development. China's high-quality development and opening up will provide new opportunities and potentials for China-EU cooperation, Xi noted, calling on both sides to strengthen green and digital partnership and boost mutual investment and cooperation. In 2024, trade between China and the EU soared to $785.8 billion, an increase of over 300 times compared to when diplomatic relations began in 1975, according to China's customs authorities. Two-way investment flows have also shown sustained growth in recent years, indicating a positive trend. Chinese battery manufacturer CALB, for instance, is building a $2.2-billion plant in Sines, Portugal, expected to create 1,800 jobs. Xi expressed hope that the EU can remain open in the trade and investment market, refrain from using restrictive economic and trade tools, and foster a sound business environment for Chinese enterprises investing and operating in the EU. At the 25th China-EU summit on Thursday, both sides agreed to forge an "upgraded version" of the China-EU export control dialogue mechanism, have timely communication on each other's concerns and jointly keep the industrial and supply chains between China and Europe stable and unimpeded. Multilateralism Xi said China has always viewed and developed China-EU relations from a strategic and long-term perspective, regarded the EU as an important pole in a multipolar world and consistently supported European integration and the strategic autonomy of the EU. China-EU relations are not targeted at, subjugated to, or controlled by any third party, he said, calling on both sides to deepen strategic communication, enhance understanding and mutual trust, and foster a correct perception of each other. Pascal Lamy, the former European commissioner for trade, told CGTN that despite differences, China and the EU share crucial common ground in defending multilateralism and cooperating on global challenges like climate change, biodiversity loss and ocean protection. Among the outcomes of Thursday's summit, leaders of China and the EU issued a joint statement on climate change, highlighting their shared commitment to addressing climate change and pursuing green development. Xi underscored the importance of China and the EU as constructive forces for multilateralism, openness and cooperation, and called on both sides to provide more stability and certainty to the world. CONTACT: Email: cgtn@
CBS News
10 minutes ago
- CBS News
Hops and community are on tap at West Sacramento brewery, celebrating California Craft Beer Week
Craft brewers statewide are showing off their brews to recognize California Craft Beer Week through Sunday, July 27. It's an effort to bring community and craft beer together while spotlighting California's best locally made brews. The special edition pint glass, designed by a Sacramento artist, is only $5 and supports the California Craft Brewing Association. Breweries like Jackrabbit Brewing Company are putting their best hop forward, putting a spotlight on their specialty beers and West Sacramento taproom. "You come in, have a pint of beer and get to know your neighbor," said Evey Ramos, the brewery's events coordinator. Jackrabbit's featured "Hop Stomper" beer was an instant best-seller, thanks in part to the familiar face on the can. The A's relocation to West Sacramento this season meant they met the moment by pitching an A's themed can -- with the mascot Stomper featured, it has already been a homerun. "It sold out of the taproom in a week and a half. It was crazy," said Ramos. The Hop Stomper is still sold out, but a new batch will launch in the taproom next week for purchase. With every pour, there's a purpose. The creative process starts in the brewhouse. "Tons of carbonation on this, which is what we go for," said head Brewer Mike Stone, pouring a glass directly from the tap in the cellar. The taste test is part of perfecting each brew. It comes after a lesson in Fahrenheit and fermentation. It's the science before the sip. "Our team just tweaks it one beer at a time," said Stone. The art is in creating something everyone can enjoy. "I worked corporate industry for seven years and found out I wasn't meant for a desk job and found my way into a brewery," said Stone."Watching other people enjoy something I've put a lot of time and effort into, that's the icing on the cake." Despite the dedication and drive, it's an industry in decline. In 2024, nationwide, more craft breweries closed than opened, according to the Brewers Association. In addition, last year the craft beer market also hit an all time low due to rising costs and declining sales. "I think any craft industry is difficult. You're making something with your hands, your heart, your soul and hoping people want to buy it. If you find somebody local who you love and want to support, then please, please do," said Ramos. Drinking and buying craft beer is what keeps the local taps from running dry. This Sunday, Jackrabbit Brewing is finishing off Craft Beer Week with a jazz concert fundraiser supporting local high school musicians. To purchase the West Sacramento-brewed beers, visit their website. Jackrabbit also recently launched a new venture creating custom craft beer cans for corporate of gifting needs. Customers can work with their in-house designer to create the perfect custom label.
