She Said Yes

After months of uncertainty and speculation Theresa May pledged the UK is determined to make a decisive break from the European Union, quitting the single market and seek a customs union agreement instead, to ensure a “smooth and orderly Brexit”. She also said Parliament would be voting on the final Brexit deal, quelling fears that any package would essentially be “forced” on the country without the possibility to renegotiate – although it would be hard to imagine a scenario where Parliament rejects a deal after months or possibly years of negotiating efforts in the first place.

The biggest reaction came from the currency market, where sterling racked up its biggest intraday gain versus the US dollar in almost 24 years. The pound rose dramatically against all its peers, but the move against the dollar was exacerbated by incoming US President Donald Trump who voiced concerns about the level of the US dollar on Tuesday. Indeed, the business man turned politician has upped his protectionist rhetoric and has continued to speak harshly about China and the fact that Beijing’s intervention keeps the currency too weak versus the US currency, making US companies uncompetitive.

Across the Atlantic in snowy Davos, Chinese President Xi Jinping was speaking in very different tones. In China’s first ever appearance at the World Economic Forum, Xi strongly defended globalization and borderless trade and investment. “No one will emerge as a winner in a trade war,” Xi said to applause. US advisors present at the meeting said that the incoming administration support free trade, but would like to see more “symmetry” since they believe current agreements put the United States at an unfair disadvantage.

The Tobacco Industry Consolidates

After 3 months of to and fro British American Tobacco plc finally reached an agreement to buy full control of rival Reynolds American Inc. The offer, worth almost $50 billion, marks the creation of the world’s largest publicly traded tobacco company by revenue.

BAT is the maker of – amongst others – Lucky Strike and Dunhill cigarettes. Reynold’s most popular products are Camel cigarettes, but it has also ventured into e-cigarettes with its Vuse brand, a sector BAT wants to exploit. The deal was practically a half-and-half cash and shares deal, and values Reynolds at almost 17 times its earnings before interest, tax, depreciation and amortization – EBITDA for the financial reporting wizards.