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MARKETS

• U.S. economy: GDP, which measures the total output of goods and services in the economy, grew at a 2.1% annual rate in the final quarter of 2019. None of the major themes have changed much—consumer spending was solid, but business investment continues to drop.

GEOPOLITICS

Everyone in the U.K. Tonight

On June 23, 2016, 52% of British voters chose to leave the EU, a sprawling governmental organization spanning 28 countries.

A lot has happened in the 1,317 days following the vote: Prime ministers stepped down, proposed deals came and went, ceremonial maces were grabbed. But tonight, at 11pm London time (6pm ET), Brexit is actually, seriously, indubitably happening. The U.K. will leave the bloc and the EU will become a perfect cube.

It's a historic moment that reflects the dissatisfaction many Europeans feel toward the ambitious political and economic experiment.

What lies ahead

We've all done it: the awkward double goodbye. Britain will enter a transition period in which...not much changes. The U.K. will remain part of the EU's tariff-free single market and customs union. Travel shouldn't be affected. The U.K. will still contribute to the EU budget. And Liverpudlians will be free to go work in Milan and vice versa.

During this period, U.K. Prime Minister Boris Johnson will be zipping around the globe trying to score trade deals with the EU and other countries.

• It'll be a sprint. The transition ends at the end of 2020, and Johnson has ruled out any extension.
• The EU's recent trade deals with Japan and Canada took seven years to massage, the NYT notes.

Zoom out: "The U.K. is entering a decade of potentially profound structural change," Bank of England Governor Mark Carney said at his final policy meeting yesterday. Even if Johnson gets those trade deals signed, lower immigration and business investment will stunt already limp economic growth. If he doesn't…expect supply chain chaos.

The "not very important, but still fun" section

1. British passports will switch from the EU's burgundy back to blue, a design that was introduced nearly 100 years ago.
2. Today, the Royal Mint will release about 3 million commemorative 50p Brexit coins bearing the inscription "Peace, prosperity and friendship with all nations."

C-SUITE

Ginni Rometty Is Sailing Into the Big Blue

IBM made the surprise announcement yesterday that CEO Ginni Rometty will step aside April 6.

Looking back

When Rometty ascended to the corner office in Jan. 2012, IBM was still shedding its image as a legacy hardware provider. Rometty refocused the company on cloud computing services and emerging technologies like AI, blockchain, and quantum computing.

• It’s been a bumpy ride for investors, who watched IBM stock decline 27% over the last eight years.
• IBM has struggled to keep pace in the competitive cloud market as Amazon and Microsoft surged ahead.

Don’t forget the trailblazing. Rometty was IBM’s first female CEO and one of just a handful of female Fortune 500 CEOs.

Looking ahead

Taking over from Rometty is cloud and cognitive software boss Arvind Krishna, a key architect of IBM’s 2019 acquisition of Red Hat—a $34 billion play for what's known as the "hybrid cloud" market. Red Hat’s CEO Jim Whitehurst will become IBM's president.

IBM stock was up as much as 5% after hours following the news.

ECOMMERCE

Amazon's Ridiculous Holiday Quarter: By the Numbers

$87.4 billion: Revenue that beat estimates.

$3.3 billion: Net income that beat estimates.

798,000: Amazon’s global headcount after it added over 250,000 part and full-time employees over the holiday season. That's more than the population of Vermont.

150+ million: The number of Prime subscribers, up from 100 million in April 2018.

Four: After Amazon’s 11% stock surge in after-hours trading, it will eclipse $1 trillion in market cap today. There will be four public U.S. companies worth at least $1 trillion (the others are Apple, Alphabet, and Microsoft).

$93 billion: The market cap of UPS at the close yesterday. We only mention it because Amazon’s market cap rose more than $110 billion after it reported earnings. So it gained a UPS plus lots of Morning Brews.

Bottom line: Amazon’s heavy investments in shipping paid off during the holidays.

PUBLIC HEALTH

Coronavirus Hits Market for Antique Rococo Birdhouses

Well...not yet. But the viral outbreak has hurt some unexpected corners of the biz world.

First, the obvious: China’s economic indicators.

• The effects of the coronavirus could knock up to one percentage point off Chinese economic growth in Q1, Morgan Stanley said.
• Global growth will likely see a slight dip, but nothing permanent.

Next, the “hadn’t thought of it, but makes sense I guess.”

• Esports leagues have nixed several matches in China planned for February and March.

And then, the “sacré bleu.”

• Some upscale Parisian shops have seen a drop in visitors. Chinese shoppers are usually among their most generous patrons, spending an average of $1,136 when in the City of Light, per the city’s tourism board.

Finally, the “...what?”

• U.S. Commerce Secretary Wilbur Ross implied yesterday the virus outbreak might encourage American manufacturers to move operations from China back to the States.

Zoom out: Yesterday, the World Health Organization declared the coronavirus outbreak a global public health emergency.

E-CIGARETTE

Altria Bought a Junk Juul

Beware the pawn shop. Yesterday, tobacco giant Altria said the value of its stake in Juul had plummeted by $4.1 billion. The e-cigarette leader’s value is down 67% since December 2018, when Altria paid $12.8 billion for 35%.

Altria CEO Howard Willard attributed the writedown—the second since October—to three factors:

1. Litigation. Lawsuits against Juul have increased more than 80% since November 2019, Altria says.
2. Increasingly strict regulations on flavored vaping products popular with the youths.
3. A mysterious, vaping-related lung illness.

To cope, Altria's setting boundaries. It retracted an original agreement to support Juul's marketing and distribution, and reworked Juul's board to include Altria representatives.

• Plus, Altria secured the right to dump its non-compete if either a) Juul is blocked from selling vaping products for at least a year or b) the value of Altria's stake in Juul dwindles to 10% of the original price ($1.28 billion).

Looking ahead...to stay on U.S. shelves, Juul needs to submit its products for FDA approval by May.

QUIZ

Toss a Coin to Your Quizzer

'O valley of plenty! 'Tis the Brew's Weekly News Quiz.

1. Fill in the blank: ____-____ trading uses complex algorithms to execute trades in hyperspeed. A new study released this week estimates the practice costs investors $4.8 billion annually.

2. One sans serif startup lost its unicorn horn this week ahead of its IPO, meaning it's now valued at less than $1 billion. Can you name it?

3. On Wednesday, President Trump signed into law a revamped North American trade deal called USMCA. Name the 1994 trade deal it replaced.

• Bonus to win a car: What does USMCA stand for?

4. WeWork is phasing out one of the following amenities at its North American office spaces. Which one?

• "Do What You Love" posters
• Happy hours
• Beer and wine taps
• Air conditioning

5. Victoria’s Secret’s parent company is reportedly considering selling the brand known for 5 for $25 deals and outdated beauty standards. What’s the parent company’s name?

Answers: 1. High-frequency 2. Casper 3. NAFTA; Bonus: U.S.-Mexico-Canada Agreement 4. Beer and wine taps 5. L Brands

WHAT ELSE IS BREWING

• Apple deployed its new maps software.
• The Guardian will no longer run ads from fossil fuel companies.
• The European Parliament is calling on tech companies to create a universal charger that works across devices and brands.
• Unilever is considering selling parts of its tea portfolio, including Lipton. Kermit is readying his bid.
• Southwest Airlines and the FAA have routinely failed to meet safety requirements for passenger aircraft, according to a WSJ report.

FRIDAY PUZZLE

Today’s Friday Puzzle is going to be a challenge, but we think you’re up to it. Every year before the Super Bowl, we do a quiz on Roman numerals. This year’s challenge borrows from an epic Jeopardy! category from 2014: “Initials to Roman Numerals to Numbers.”

How it works: You’ll be given a clue that’ll lead to a person’s name. Those person’s initials will form a Roman numeral that can be translated into a regular number. The final answer is that number.

• Example question: For the TV late-night host who in April 2014 announced he’d be retiring
• Answer: 550. David Letterman = DL

Let’s go:

1. For the three-time Grammy nominated singer of “Havana”
2. For the naturalist who discussed his theory of evolution in The Expression of the Emotions in Man and Animals
3. For the actor who had the title role in The Bourne Ultimatum
4. For the pilot who was Time’s first Man of the Year

FRIDAY PUZZLE ANSWERS