Good morning.
The British Pound dropped to its lowest level since 1985 this morning, on fears that the U.K. has opted to leave the EU’s single market as part of its Brexit process. That threatens to be more disruptive to its trade with the EU than some of the ‘Brexit Lite’ options that were theoretically on the table. Prime Minister Theresa May said on Sunday she would start formal exit talks by March next year.
The currency hasn’t been helped by comments from Chancellor Phillip Hammond that the U.K. economy is headed for a “roller coaster ride” as the country enters what is necessarily a confrontational negotiation process in which the U.K. appears to have the weaker hand.
The stock market is less bothered though. The FTSE 100 has hit 7,000 for the first time in a year. Admittedly, that’s largely because international companies whose shares trade in the U.K. tend to benefit from a lower pound, since their profits are earned outside the country, especially index heavyweights in the commodities sector such as Royal Dutch Shell and Glencore. The FTSE 250, which includes more domestically-focused companies, has hit an all-time high (even if it’s still lower than before the referendum in dollar terms). Confused yet?
Meanwhile, the backlash against globalization will be topic A at this week’s meetings of the IMF and World Bank in Washington. Rich Miller at Bloomberg writes of the “existential threat” to the global order.
Best quote from Miller’s story: “I’m characterizing the global economy as something akin to a driverless car stuck in the slow lane,” says David Stockton, former Fed official and chief economist at LH Meyer Inc. “Everybody feels like they are being taken for a ride but they’re pretty nervous because they can’t see anybody in control.”
More below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
NOTE: We’re switching to a new email provider soon. To ensure delivery of this newsletter, please whitelist or add fortune@email.fortune.com to your address book.
Top News
• Manufacturing Picked up in September
The U.S. economy may be picking up steam again, according to the Institute of Supply Management. The ISM’s purchasing managers’ index for September rose to 51.5 from 49.4 in August, easily outstripping expectations and bolstering, once again, the case for an interest rate hike from the Federal Reserve. Industry data also showed an unexpectedly strong rise in domestic truck sales, always a good, if very rough, proxy for business activity. Car sales, by contrast, failed to show any meaningful growth for the sixth month in a row, reinforcing impressions that the industry has now exited a sweet spot in the current economic cycle. Fortune
• Facebook Takes On Craigslist, Ebay
Facebook moved in to territory previously dominated by the likes of Craigslist and Ebay with the creation of an online marketplace called, well, Marketplace (that’s an A for clarity, and a D- for imagination). But in contrast to, for example, Ebay, Facebook won’t be handling payments or coordinating delivery. It will leave that to the buyer and seller. In a development that reflects the modern order of things, the mobile app will be rolled out first, with a desktop version only becoming available later. Fortune
• NY AG Issues Cease and Desist Order to Trump Foundation
The New York Attorney General ordered the Trump Foundation, Donald Trump‘s charitable group, to stop soliciting donations in New York, accusing it of violating state law. The notice posted by the AG’s office said the organization had failed to provide annual reports and audited financial statements as required by the law, and demanded they be supplied within 15 days. That should leave the Attorney General’s office enough time to leak them before the election (did we mention Eric Schneiderman is a Democrat?). Given that the GOP nominee is still within the margin of polling error in many key states even after another week going ever further off the rails, it’s far from clear that those inclined to vote for Trump will change their minds over irregularities at the Trump Foundation. Certainly not when the reflex whataboutist response with regard to the Clinton Global Initiative is so easy (even if the CGI appears to have no trouble filing audited financial statements). Fortune
• There’s No Fire Here, Not Even Smoke, Says Lampert
Sears Holdings CEO Eddie Lampert forcefully denied media reports the retailer is planning to shut down its Kmart stores. It’s the second time in 10 weeks the company has felt the need to reassure investors, employees, and vendors that the discount chain is staying in business. Amid steep sales declines, Kmart has been shutting stores for years—including 78 closings planned this year—stoking speculation that its parent company was getting ready to put the chain out of its misery. Kmart’s same-store sales fell 3.3% in the second quarter. Intriguingly, Lampert invoked what could be known as the “Fuld-Cryan” defense of claiming that the rumors were being spread by those who intended harm to the company. Fortune
Around the Water Cooler
• Google to Launch VR Headset
Branded smartphones and AI innovations aren’t the only things that Google will be presenting to the world at its new product launch in San Francisco later today. The company will also show off its ‘Daydream’ virtual reality headset, which it aims to sell for as little as $79. That is in the same ballpark as Samsung’s Gear VR, but a good deal cheaper than Facebook’s Oculus Rift and HTC’s Vive, which will be at pains to stress their equipment’s greater capabilites as we ramp up to holiday season. Fortune
• LVMH Puts Rimowa in the Bag
LVMH is paying over $710 million to acquire 80% of Rimowa, a German high-end luggage maker popular with the growing army of Asian tourists (who like the way its aluminum cases protect their luxury purchases on the way home). The deal gives LVMH more diverse exposure to a luxury sector subject to the caprice of Chinese authorities. It comes only a few months after Samsonite agreed to buy New Jersey-based Tumi for $1.8 billion, and increases concentration in a part of the market that appears doomed to faster-than-average growth. Perhaps the most intriguing aspect of the deal is that LVMH’s CEO Bernard Arnault will install his son Alexandre as co-CEO alongside Dieter Morszeck, in what seems to be a long-term succession play. Another point worth highlighting is that Rimowa, founded in 1898, is one of many Mittelstand companies to run out of either the means or the will to remain independent as generation succeeds generation. Fortune
• Bass Pro Shops Snaps up Cabela
Bass Pro Shops agreed to buy Cabela’s Inc. for some $4.5 billion in an all-cash deal that brings together two of the country’s biggest retailers of outdoor sports gear. The combined operation will have 180 stores (although the trend in retailing probably puts a question mark over that), with around 40,000 staff and over 20% of a domestic market for outdoor sports equipment worth around $50 billion a year, according to The Wall Street Journal. Bass CEO and majority shareholder John Morris will continue as CEO of the new company. First the rumor, then the fact of the deal have combined to push Cabela’s shares up 30% from where they were trading beforehand, a handsome payoff for activist investor Elliot Management. WSJ, subscription required
• Samsung Eyes $8 Billion BioLogic IPO
Samsung Biologics is looking for a valuation of up to $8.2 billion for its biologic drug manufacturing arm in its initial public offering, according to documents released by the company Tuesday. The company is raising money (IPO proceeds are slated at $1.7 to $2 billion) to build its third large-scale manufacturing plan, a reflection of how quickly the field of biologic drugs—notably, biosimilars—is growing. Biosimilars are like generic copies of biologic medicines. Samsung BioLogics’ subsidiary Samsung Bioepis is focused on developing biosimilars of branded drugs whose patents are either already expired or expiring soon. Samsung Bioepis said Tuesday it has just sought regulatory approval to sell its copy of of Roche’s blockbuster breast cancer drug Herceptin in Europe. Fortune
