Wall Street Caution Lingers: Hedge Funds Hold Back Amid Fragile September Outlook

Economic

Summary:

Despite a near-record high in global stock indices and rising expectations of a U.S. Federal Reserve rate cut, hedge funds remain hesitant toward U.S. equities as they enter a seasonally volatile September....

Hedge Funds Retreat Despite Market Gains

After a modest 2% gain in the S&P 500 for August, hedge funds appear unimpressed. Goldman Sachs data reveals they were net sellers throughout the month, with leverage levels the amount of borrowed capital used for trading continuing to decline. Morgan Stanley noted a 1% drop in leveraged trading activity across the U.S. and Europe toward the end of August, highlighting muted participation in the broader equity rally. This pullback indicates a deliberate move to reduce risk, despite upward momentum in both U.S. and global markets.

Historical patterns show that U.S. equity markets have posted negative returns in September roughly half the time over the past two decades. Corporate stock buybacks are also restricted this month due to regulatory rules, removing a key source of demand. According to Erlen Capital’s Bruno Schneller, systematic hedge fund strategies are already fully positioned, leaving little room to absorb shocks. He notes that volatility typically increases heading into autumn, compounding the risk of sharper corrections.

Market Fragility Beyond Equities

Porchester Capital’s CIO Omar Sayed points to potential systemic risks emerging from the bond markets. Japanese and British 30-year government bond yields are hovering at multi-year highs, suggesting brewing instability. He warns that financial stress in one market such as the unexpected Bank of Japan rate hike that triggered a global equity selloff in August 2024 could spill over into others. High long-term yields are especially troubling for interest-rate sensitive sectors and could limit central banks’ flexibility.

Retail investors now control over 40% of the U.S. equity market, with UBS estimating that direct equity holdings will reach 265% of U.S. disposable income in 2025 surpassing the previous peak in 2021. This heavy retail involvement may be supporting current valuations, but experts warn it could also amplify downside risk. If economic conditions weaken and retail investors begin pulling back from equity speculation, it could ignite a self-reinforcing cycle of selling.

China Attracts Hedge Fund Attention

While hedge funds remain cautious on Wall Street, they have turned aggressively toward Chinese markets. Goldman Sachs reported record net inflows into Chinese equities in August, with Morgan Stanley noting the highest monthly buying volume since February. This rotation suggests hedge funds are seeking relative value opportunities in regions perceived to offer better upside or less correlation to fragile Western markets.

Despite strong recent performance in equity indices and anticipated policy easing, hedge funds' caution signals deeper concerns about structural vulnerabilities across global markets. Rising long-bond yields, overextended retail exposure, and reduced corporate buybacks make September a high-risk month. Until greater clarity emerges on inflation, growth, and monetary policy, institutional money is likely to remain on the sidelines or seek safer international bets especially in markets like China.

Source: Reuters

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Economic

Strategic Hiring to Regain Momentum

In a bold strategic move, Westpac announced plans to hire 350 new business bankers by 2027, with 135 already hired in 2025. The initiative, disclosed by Paul Fowler Westpac’s CEO of Business Banking and Wealth marks a clear shift in the bank’s focus back toward its business lending roots, after years of lagging behind competitors.

Currently holding 16.1% of the business lending market as of July 2025, Westpac has improved from 15.3% in the previous year. Despite this growth, it still trails behind NAB (21.6%) and CBA (18.85%). Westpac’s latest strategy aims to close that gap significantly.

Aggressive Competition in the Lending Space

Analysts indicate that both Westpac and CBA are targeting NAB’s dominance by lowering lending rates, enticing business customers to switch. The timing may prove advantageous: NAB’s business banking head Andrew Auerbach, appointed in June, lacks direct experience leading a business banking division, which some analysts see as a potential vulnerability.

This competitive pressure comes amid a broader reshaping of Australia’s business banking landscape, with all major players aggressively pursuing small and medium enterprises (SMEs) to secure higher-yielding loan portfolios.

Business Division Performance and Vision

Westpac’s renewed emphasis on business banking is already paying off. Its business and wealth division contributed A$1.1 billion in net profit in the first half of the current financial year making it the largest earnings contributor within the bank’s total A$3.3 billion profit.

Paul Fowler acknowledged that while Westpac once led the market in business lending, it had “lost focus” over the past decade. This hiring wave, paired with a targeted market push, signals Westpac’s ambition to reassert itself as a dominant force in the segment.

Westpac’s aggressive recruitment plan underscores its commitment to expanding business banking operations through relationship-driven service and competitive pricing. With NAB set to deliver a business banking update shortly, the battle for Australia’s commercial lending sector is intensifying, promising a dynamic shift in market dynamics over the coming years.

Source: Reuters

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Economic

A Deepening Labor Paradox

Europe is confronting a troubling paradox in its labor market: unemployment remains high while many industries struggle to find skilled workers. This imbalance between labor supply and demand is not only hampering business operations but also threatening the EU’s long-term strategic goals.

As of Q2 2025, the EU reported more than 13 million unemployed people, yet key economies are facing severe labor shortages. Germany has over 1 million job vacancies, while France reports nearly half a million. The EU's overall job vacancy rate stands at 2.1%, with sharp differences across countries from 0.6% in Romania to 4.2% in the Netherlands.

Even in countries like Germany, where the unemployment rate is relatively low (3%), more than 1.7 million jobs remain unfilled. In France, unemployment remains high but sectors like construction and engineering suffer from a lack of skilled labor.

Skill Mismatch as a Primary Barrier

At the core of this paradox is a widespread skills gap. According to recent surveys, more than 75% of businesses in 21 EU countries report difficulty finding suitable candidates. Small and medium-sized enterprises are particularly affected, with over half citing skill shortages as one of the top three recruitment challenges.

Sectors most affected include IT, healthcare, construction, and renewable energy. Meanwhile, other fields such as administrative support, design, and manual labor are oversaturated. This imbalance is driving up recruitment costs, delaying project timelines, and making business expansion more difficult.

Economic and Social Implications

The skill mismatch has broad social and economic consequences. Youth and women are the most affected groups. In Spain, for example, youth unemployment remains stubbornly high at 24–25%, despite a recovery fueled by immigration.

The lack of skilled labor is also slowing the EU’s clean energy transition and digital infrastructure rollout both of which are vital for the bloc’s competitiveness and sustainability goals. Governments are under pressure to increase unemployment benefits, even as high-value jobs remain vacant and tax revenues decline.

The Urgent Need for Skills Investment

Solving Europe’s labor paradox isn’t just about creating more jobs it’s about equipping the existing workforce with the right skills. Massive investments in reskilling and upskilling programs are essential. In Italy, some companies have resorted to launching in-house training programs due to the inability to hire qualified staff externally.

Europe stands at a critical crossroads: either close the skills gap or risk falling behind in the global race for innovation, clean energy, and economic leadership. The labor shortage is no longer just a workforce issue it’s a structural threat to the continent’s future prosperity and strategic autonomy.

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Commodity

Crude Prices Rise on Renewed Supply Disruption Fears

Oil markets gained ground on Tuesday as rising geopolitical tensions particularly the escalation in the Russia-Ukraine conflict rekindled fears of supply instability. Brent crude climbed 0.59% to $68.55 per barrel, while West Texas Intermediate (WTI) advanced 1.64% to $65.06.

The gains were partly driven by the impact of recent Ukrainian drone strikes, which have reportedly disabled oil processing facilities responsible for 17% of Russia’s total refining capacity amounting to roughly 1.1 million barrels per day. This capacity reduction signals a tangible threat to global oil supply, especially from the world’s second-largest exporter.

The connection between these attacks and price movements is directly causal: infrastructure damage reduces available export volumes, heightens risk premiums, and tightens the physical market.

Ukraine’s Offensive and Broader Strategic Aims

Ukrainian President Volodymyr Zelenskiy announced plans for deeper strikes into Russian territory, building on weeks of intensified efforts to disrupt Russia’s energy and logistics backbone. In response, Russia has increased its own aerial campaigns, targeting Ukraine’s energy grid and transport infrastructure.

This tit-for-tat escalation has raised the specter of prolonged and wider disruptions to Eastern European energy flows. Daniel Hynes of ANZ noted in a market brief that “ongoing risks to energy infrastructure in Russia remain high,” with Ukrainian strikes over the weekend reinforcing market nervousness.

While these developments remain regional in scope, their global implications are substantial due to the centrality of Russian crude in global supply chains. As more facilities are disabled or operate at limited capacity, global inventories may tighten further.

Geopolitical Undercurrents: China’s Global South Push

Beyond the battlefield, geopolitics added another layer of uncertainty. At a recent multilateral summit, Chinese President Xi Jinping reiterated his vision for a "new global order" prioritizing the Global South an explicit challenge to U.S.-led economic systems. The summit, attended by Russian and Indian leaders, signals growing coordination among major non-Western energy consumers and producers.

China and India remain Russia’s top crude buyers. While Trump has levied punitive tariffs on India for continuing Russian oil purchases, he has notably refrained from targeting China an asymmetry that may influence future trade dynamics and energy alignment.

The correlation here is strategic rather than reactive: shifts in geopolitical blocs may reshape long-term oil flows, alliances, and pricing structures, reinforcing regionalism in global energy trade.

Market Outlook Ahead of OPEC+ Meeting

With the next OPEC+ meeting scheduled for September 7, markets are now pivoting their attention to the group’s output guidance for October. Recent production discipline has been central to price stability, but speculation lingers on whether supply adjustments will be made in light of the ongoing conflict and weakening global demand.

The expectation of supply stability from OPEC+ acts as a partial anchor on price volatility, although any surprise adjustment could serve as a catalyst. Current prices remain about 8% lower year-to-date, reflecting broader macroeconomic concerns despite localized supply risks.

Oil’s latest uptick reflects mounting anxieties over global energy security, as the Russia-Ukraine war intensifies and geopolitical posturing from China compounds market tension. With physical disruptions now impacting millions of barrels per day and a pivotal OPEC+ decision looming, volatility is likely to persist. Investors are watching not just barrels, but borders where energy, diplomacy, and power politics are increasingly converging.

Source: Reuters

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Economic

Rethinking Battery Chemistry: A Strategic Alternative to Lithium

Offgrid Energy Labs, a deep-tech energy storage startup based in India, is challenging lithium’s long-standing dominance in the battery market by developing and commercializing a zinc-bromine battery system called ZincGel. Amid volatile lithium supply chains, limited mineral access, and high costs, the startup offers a timely alternative for stationary energy storage.

ZincGel delivers 80–90% of the energy efficiency of lithium-ion batteries but offers lower levelized costs and longer service life. The technology also utilizes a proprietary water-based electrolyte, greatly minimizing fire risks, and boasts resilience under extreme temperature conditions, including operations at –10°C. With improved safety, affordability, and endurance, ZincGel positions itself as a strategic option for net-zero industries and off-grid energy applications.

The causal relationship is clear: the rising global dependence on lithium heavily sourced and refined in China creates systemic risk. Offgrid’s zinc-based approach directly mitigates this vulnerability by leveraging more abundant, safer, and regionally accessible materials.

Strategic Capital to Accelerate Commercialization

The $15 million Series A funding round, led by Archean Chemicals and joined by Ankur Capital, values Offgrid at approximately $58 million post-money. Archean now holds a 21% stake, a move aligned with its existing strengths in bromine production and supply chain management. This strategic alignment provides both material access and scale-up capabilities that are crucial for Offgrid’s next growth phase.

The funding will support the construction of a 10-megawatt-hour demonstration facility in the UK by Q1 2026, followed by commercialization and plans for an Indian gigafactory. Offgrid’s U.K. facility is designed to operate with a carbon footprint 50% lower than conventional lithium battery plants, thanks to simpler manufacturing processes and reduced material intensity.

While India remains a major target market, Offgrid chose the UK for its initial pilot due to Europe’s advanced battery manufacturing ecosystem, easier access to early customers, and the presence of two co-founders already based in the region.

Technology and Intellectual Property: A Differentiated Edge

Founded in 2018 at IIT Kanpur by Tejas Kusurkar, Brindan Tulachan, Rishi Srivastava, and Ankur Agarwal, Offgrid has spent its formative years building core intellectual property. To date, the company has secured more than 25 IP families and 50 assets across global markets, including the U.S., U.K., China, India, Australia, and Japan.

Compared to other zinc-bromine battery players such as EOS Energy Enterprises, Offgrid claims its proprietary electrolyte chemistry and carbon-based cathodes enable both fast charging and long-duration discharges (6–12 hours), while significantly lowering material costs by reducing the use of graphite.

These performance metrics when paired with flexible application tuning and long cycle life allow the ZincGel system to meet a variety of industrial energy storage needs that lithium batteries cannot serve as effectively.

Commercial and Global Traction: Positioning for Deployment

Offgrid’s early customer base includes notable names such as Shell and Tata Power, both of which are testing ZincGel for integration into peak-shaving, grid stability, and decentralized power scenarios. The startup is also in discussions with global utility players like Enel Group to tailor battery systems for specific European requirements.

Its early production has been manual, conducted in a lab in Noida, India, but with new capital and facilities, the firm is preparing to enter commercial-scale manufacturing. The flexibility of the technology also allows Offgrid to customize battery configurations based on end-user needs, expanding its applicability across industrial, renewable, and off-grid segments.

The startup’s business case rests on delivering the same (or better) performance at lower cost a value proposition that targets customers looking for both economic and environmental sustainability.

Offgrid Energy Labs’ zinc-bromine battery platform represents a decisive shift in energy storage innovation one that challenges the status quo of lithium-centric solutions. With robust IP, strategic investors, and clear market applications, the company is poised to become a major player in the global battery transition. As countries like India and the U.K. seek to scale renewable infrastructure without relying entirely on lithium, Offgrid’s ZincGel may offer a sustainable, cost-efficient alternative built for the next era of clean energy resilience.

Source: TechCrunch

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Political

Economic

Chinese President Xi Jinping will host his country's largest-ever military parade this week, as he seeks to recast Beijing as the custodian of a post-U.S. international order at a time of deep geopolitical uncertainty.More than 20 world leaders including Russia's Vladimir Putin and reclusive North Korean leader Kim Jong Un will gather in Beijing for the September 3 "Victory Day" event marking 80 years since Japan's defeat at the end of World War Two.

The highly choreographed spectacle aims to project China's military might and diplomatic clout amid doubts over the United States' global role, as President Donald Trump slashes foreign aid, retreats from international institutions and wages a sweeping trade war on allies and rivals alike.The unprecedented joint appearance of Xi flanked by Putin and Kim overseeing the showcase of cutting-edge equipment like hypersonic missiles and drones, may well be the defining image of the parade, an "Axis of Upheaval" defying the West.

For Kim, who crossed into China on his special train early on Tuesday, it will be his first major multilateral event and the first time a North Korean leader has attended a Chinese military parade in 66 years."The presence of Vladimir Putin, (Iran's) Masoud Pezeshkian, and Kim Jong Un underscores China's role as the world's leading authoritarian power," said Neil Thomas, a Chinese politics expert at the Asia Society Policy Institute's Center for China Analysis.

The increase in leaders from Central Asian, West Asian and Southeast Asian countries attending this year's parade compared to the last one in 2015 highlight's Beijing's progress in regional diplomacy, Thomas added.Proceedings will kick off at 9 a.m. (0100GMT), according to China's official Xinhua news agency.Slovakian Prime Minster Robert Fico and Serbia's Aleksandar Vucic, both critical of sanctions on Russia over its war in Ukraine, are the only Western leaders attending.

Trump, whose own June military parade drew the largest nationwide protests since his return to power, has repeatedly talked up his close relations with Xi, Putin and Kim but has failed to make any major diplomatic breakthroughs.

'MEMORY WAR'

Earlier this week, Xi rallied leaders of developing nations to advocate for a more equal, multipolar world and promote the "correct historical perspective" of World War Two at a regional security forum in the port city of Tianjin.The parade too is part of a "memory war" in which China and Russia offer an alternative history to a Western narrative they believe underplays their role in fighting fascist forces, the Brookings Institution wrote in a paper last week.Xi has cast the war as a major turning point in the "great rejuvenation of the Chinese nation" in which it overcame Japan's invasion to become an economic and geopolitical powerhouse.

While some residents have requested patriotic and military-themed haircuts ahead of the parade, such enthusiasm may be not be shared by all ordinary Chinese people.Downtown Beijing has been virtually paralysed by security measures and traffic controls in the weeks leading up to the parade.Nationwide, local governments have mobilised tens of thousands of volunteers and Communist Party members to monitor for any signs of potential unrest ahead of the parade, estimates based on online recruitment notices show.

Taiwanese officials on Monday estimated Beijing was spending $5 billion - the equivalent of 2% of its entire defence budget - on the parade.

Source: Reuters

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Political

Forex

Russia-Ukraine Conflict

European Commission President Ursula von der Leyen told the Financial Times that European nations are developing detailed plans to potentially send troops to Ukraine as part of a future peace agreement, despite it being obvious to all the world that Moscow would never agree to this as a basis of peace or ceasefire.

Hawkish European leaders continue to claim they have support from President Donald Trump for pursuing such a plan, which would see a joint multinational force of troops from various European armies, backed by a US security guarantee. "President Trump made it very clear that the US would be part of the security backstop," von der Leyen said."Security guarantees are paramount and absolutely crucial," she described of the European consensus. "We have a clear road map and we had an agreement in the White House... and this work is going forward very well."

She had also said that "President Trump reassured us that there will be [an] American presence as part of the backstop. That was very clear and repeatedly affirmed."Indeed Trump had declared immediately after hosting European leaders at the White House last month, "We’re willing to help, especially from the air - because no one has what we have."However, there still appears to be some distance between Washington and European expectations, with one senior official recently explaining to Axios, "Europe can’t drag out this war with unreasonable expectations and expect the US. to foot the bill. If Europe chooses to escalate, that’s their decision - but they risk turning a potential win into a loss."

Von der Leyen admitted there's a long road ahead in terms of organizing a joint commitment for a multinational 'peacekeeping' force for Ukraine."Of course, it always needs the political decision of the respective country, because deploying troops is one of the most important sovereign decisions of a nation," she said, adding that "the sense of urgency is very high . . . it’s moving forward. It’s really taking shape."

Her words were issued during a tour of European countries which lie close to Russia, which the Kremlin is sure to see as provocative in its own right - given for example she was at a military base in Estonia, and at one point was along the Poland-Belarus border, and in Bulgaria, and toured arms depots and factories in 'NATO's eastern flank'.She called for greater EU investment in drones and missile defense, as well as cyber warfare, and even space tech. "The role of the commission is paramount in enabling the member states to finance a surge in defense." She added: "The character of warfare has completely changed,” she added, citing the need for EU militaries to invest in drones, air and missile defense, space and cyber capabilities."

But Germany didn't get the memo, with its defense minister Boris Pistorius questioning on Monday, "Those are things that you don't discuss before you sit down at the negotiating table with many parties that have a say in the matter.""I would know better than to comment or confirm such considerations in any way, apart from the fact that the European Union has no mandate or competency whatsoever when it comes to positioning troops," Pistorius followed with.