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Illustration: Aïda Amer/Axios
Stock market investors and huge pension plans in pursuit of boom-era returns are chasing just about anything with a growth story, regardless of whether the underlying company actually makes any money.
Why it matters: The market demand pushing up sky-high valuations for companies like Lyft, Uber, Airbnb and others is akin to the housing bubble in the early aughts, says Karl Dasher, CEO and co-head of fixed income at investment firm Schroders.
The big picture: Last year 81% of American companies were unprofitable in the year leading up to their public offerings, according to data from Jay Ritter, a University of Florida finance professor.
Between the lines: This latest iteration of investor FOMO has its roots in the Great Recession and the U.S. response to it.
The bottom line: Companies like Lyft will continue to find a bid as long as they can convince investors of their growth story — at least until there's a crisis or something that changes the current market environment.
Despite the dovish shift from the Fed and other developed market central banks, emerging market stocks and bonds attracted positive but relatively modest capital inflows from foreign investors in March, data from the Institute of International Finance shows.
What it means: EM has also been a major consensus trade for top asset managers since late last year. However, after a strong inflows during January and February of $52.6 billion and $31.2 billion, respectively, IIF estimates EM securities attracted just $25.1 billion of foreign capital in March.
The Australian dollar whipsawed in currency markets following its central bank's latest meeting. It was the weakest major currency in the world Tuesday morning after the Reserve Bank of Australia changed its statement to a more dovish stance.
Why it matters: Australia's GDP growth has shrunk on a per-capita basis in the last 2 quarters, entering a "per-capita recession" for the first time in 13 years. The country hasn't seen an outright growth recession in nearly 30 years, so investors are on high alert.
The big picture: Australia is seen as a proxy for China because of how much its major industries rely on trade with the world's No. 2 economy. Movements in the Australian dollar tend to reflect views on China, as its yuan currency is still far less traded on global FX markets.
Europe was home to just 15.3% of global M&A activity in the first quarter of 2019, the lowest percentage on record, according to a survey released Tuesday by Mergermarket. Deals have fallen by 20.7% since the fourth quarter of 2018.
Go deeper: So far this year, none of the 10 largest deals globally have targeted Europe, with no takeovers above $10 billion announced. The largest deal in the first quarter saw ZF Friedrichshafen acquire Swiss brake technology manufacturer WABCO for $7.2 billion.
The big picture: Globally, M&A deals rose to $801.5 billion in the first quarter, an 15% increase from Q1 2018. The U.S. saw a 29% increase year-over-year.
"The uncertainty has hit domestic European M&A," Mergermarket analysts wrote in the study. "In total, intra-European dealmaking amounted to $64.2 billion (1,169 deals), signifying that domestic activity has failed to reach the $100 billion mark for three successive quarters."
Uzbekistani President Shavkat Mirziyoyev in the presence of Federal President Frank-Walter Steinmeier, signs the guest book of Bellevue Castle. Bernd von Jutrczenka/picture alliance via Getty Images
Two frontier markets are making moves in opposing directions.
On one hand: Former soviet nation Uzbekistan is opening up to democracy and international markets. After its first ever international bond sale was 5.5 times oversubscribed (a $1 billion offering with just a 4.75% coupon on 5-year notes holding a BB- rating), the country is plowing forward toward capitalism after 20 years under ruler Islam Karimov.
Further, the Financial Times notes, "Political prisoners have been released, exchange restrictions lifted and political debate encouraged — though U.S. campaign group Freedom House still rates Uzbekistan as one of the world's least free countries."
On the other hand: Mongolia, a longtime darling of frontier market investors, is moving towards autocracy.
Anand Tumurtogoo at Foreign Policy writes, "President Khaltmaa Battulga started his career as a wrestler — and he's just forced Mongolian democracy into submission."
The Mongolia Stock Exchange Top 20 Index has fallen 5% year to date and is 26% lower since touching all-time highs in early December.
But, but, but: While authoritarianism has traditionally scared away foreign investment, recently in places like Brazil, Egypt and Turkey, investors have embraced autocrats who embrace the market.