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Illustration: Lazaro Gamio/Axios
As news about a possible truce between the U.S. and China in the trade war flowed last week the U.S. market was remarkably unshaken.
That's because investors aren't concerned about President Trump taking a hard line on a deal with China — one that would involve major reforms to their economy and the way the Asian nation does business.
The big picture: A deal in which 3 major trade issues — expanded market access, reduction of the trade deficit, reform of IP theft — are addressed with credible enforcement procedures in place is "the ideal situation," writes former macro hedge fund manager Tom Essaye in his Sevens Report market analysis, "and it's also the least likely (say 20%)."
Between the lines: Betting that Trump will not to follow-through on the extreme rhetoric of his campaign pledges has worked out well for fund managers over the past two years.
What they said: "Our view was that (Trump’s) economic threats were not credible," Federico Garcia Zamora, who manages the Dreyfus Emerging Markets Debt Local Currency Fund, told me in September 2017. Acting accordingly, he increased his holdings of peso-denominated Mexican bonds and his fund outperformed 90% of its peers.
That didn't change much last year.
"Our basic view is that it's really just a lot of noise," Brendan Murphy, head of global and multi-sector fixed income for Standish Mellon, a BNY Mellon subsidiary, told me in April 2018.
But, but, but: Not every Trump-is-a-studio-gangster trade worked out well. Investors bought into emerging markets in late 2017 and early 2018 and lost big as both EM debt and equity were crushed.
What's really happening: The U.S. market has been driven by Fed Chair Jerome Powell. Stocks swooned to near a bear market after Powell said the U.S. central bank was poised to keep hiking rates and draining liquidity by paring its $4 trillion balance sheet. It has marched higher since his U-turn in late December and January.
U.S. Treasury yields initially spiked after Trump's election but have come back to earth as inflation expectations were "pretty much diminished because we didn't get a much stronger economy," Joseph Trevisani, senior analyst at FXStreet, said in April.
The Canadian dollar, which had been one of the best-performing G10 currencies in the world this year, fell significantly on Friday. A slide in oil prices and reduced expectations for a rate hike from the Bank of Canada also hurt the loonie, which is edging towards its lowest level of the year against the U.S. dollar.
Driving the news: Canada's economy grew at its slowest past in 2.5 years in the last quarter of 2018 and some economists say first quarter GDP growth this year will be even weaker.
Why it matters: That's bad news for the global economy and especially bad news for Canadian Prime Minister Justin Trudeau.
The big picture: A downward revision in the Q4 2018 numbers and a negative print on the Q1 2019 numbers would put Canada in a recession. That could mean 2 of the world's 10 largest economies in a recession, with Canada joining Italy, which fell into recession at the end of 2018.
For Trudeau, the news couldn't come at a worse time.
Cell phone ownership growth in recent years has been driven by emerging, or developing, countries, where companies have connected 700 million new subscribers since 2014. That according to a new study from cell phone industry group GSMA.
But cell phone operators could add an additional $140 billion in new revenue by closing the female phone ownership gap.
By the numbers:
What they're saying: "The key to any of this however, is removing current barriers — including affordability and literacy rates — to mobile ownership among women," GSMA writes in the study. "Given enduring cultural realities in some of these countries, women are less likely to earn money and receive high level education compared to men."
Lyft finally filed to go public on Friday, providing the first official look at its business and financials. Lyft's average revenue per user (ARPU) in the fourth quarter of 2018 is higher than Facebook's and GrubHub's, Axios' Kia Kokalitcheva reports.
Lyft vs. GrubHub: Lyft is currently bringing in more than twice as much revenue on average per customer, but it’s also losing tons of money overall.
Lyft vs. Facebook: Yes, these companies have very different business models.
Yes, but: Both Facebook and GrubHub are profitable, unlike Lyft, which is far from it right now.
Methodology: For Facebook and Lyft, Axios used the ARPU numbers for the U.S. and Canada disclosed by the companies in SEC filings. For GrubHub, which operates only in the U.S. and has a very small presence in the U.K., Axios calculated the figures by dividing each quarter's revenue by the company's "active diners," as published in its quarterly financial releases.
Illustration: Rebecca Zisser/Axios
As investors await Lyft's IPO and the looming arrival of the LUPA stocks, Google, Microsoft, Apple and Amazon are each reportedly working on their own versions of a "Netflix for games."
Yes, but: It's easier said than done. Netflix rose to the top in part because it was able to exploit a gap in the market years ago around content licensing. An exact parallel to that doesn't exist in the gaming industry.
The big picture: Subscription bundles for games have been around for a long time, but some of the new streaming services will aim to move not only the software but the processing for the game into the cloud.
Be smart: The problem is that the economics right now don't incentivize game publishers to license their content to tech companies.
How it works: One key difference between video games and entertainment programming is that with gaming, there isn't as big a market for catalog content — material that people want to consume over and over even when it's old (think "Friends" or "Seinfeld").
What's next: A likely outcome of the streaming wars will be that tech companies begin by licensing and selling individual games a la carte instead, says Michael Pachter, a research analyst at Wedbush Securities.