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What to watch: Brexit deal hopes boost pound, TalkTalk’s £1.1bn takeover, eyes on BOE and Fed

Kumutha Ramanathan
·Contributor
·4-min read
Empty streets in the City of London near to the Bank of England. Photo: Barry Lewis/In Pictures via Getty Images
Empty streets in the City of London near to the Bank of England. Photo: Barry Lewis/In Pictures via Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and around the world.

Pound edges higher as Brexit deal looks likely

Sterling continued rising against the dollar and euro on Thursday morning as markets increasingly see a Brexit trade deal in focus, boosted by comments from a top US official on additional deal.

US Trade Representative Robert Lighthizer told the BBC the US was talking to the UK about a mini-trade deal that could lower tariffs on items such as Scotch whisky.

“I think it’s extremely likely that we have an FTA — a free trade agreement — with the UK before long,” Lighthizer said in a TV interview.

The comments helped the pound rally to a fresh two-year high against the dollar. The pound was up 0.6% against the US currency to $1.3578 (GBPUSD=X) at around 10.15am in London.

European Commission president Ursula von der Leyen also told MEPs on Wednesday there was “a path to an agreement now”, which helped spark the current sterling rally.

Bank of England rates decision

The Bank of England is expected to leave its monetary policy unchanged when policymakers meet this week, even as the rising risk of a no deal Brexit puts pressure on the central bank to act.

Economists expect the nine-person Monetary Policy Committee (MPC) to maintain the UK’s interest rate at 0.1% and keep the central bank’s programme of quantitative easing at £895bn ($1.2tn), following a £150bn expansion last month.

WATCH: Will interest rates stay low forever

TalkTalk’s billion pound takeover

The telecoms giant TalkTalk (TALK.L) has agreed to a £1.1bn ($1.49bn) takeover by shareholders Toscafund and private equity investors Penta.

The company announced on Thursday its investors will receive 97p a share as part of the deal, if they approve the takeover. It marks a 16.4% premium on its share price on 7 October before the offer was first proposed and talks began.

Toscafund is already an investor in TalkTalk, and the telecoms firm said it had a “detailed understanding” of TalkTalk’s business model and the wider sector in the UK.

Penta has also focused on telecoms firms in recent years, according to TalkTalk.

The takeover is due to take place in the first quarter of 2021.

Watches of Switzerland sales soar during lockdown

Watches of Switzerland (WOSG.L), Britain’s biggest retailer of Rolex, Cartier, Omega, TAG Heuer and Breitling watches, has raised its full-year guidance and also announced it will repay furlough cash received from the UK government, as it saw a major increase in profits and sales during the COVID-19 pandemic.

The luxury watchmaker announced its half year results on Thursday, with operating profit beating analyst expectations over the six months to 25 October, up £45.6m from £30m in the previous period, which is an increase of 52%.

Watches of Switzerland Group announced it will join other businesses in the UK by returning furlough cash.
Watches of Switzerland Group announced it will join other businesses in the UK by returning furlough cash.

The company said the “resilient” UK market led to a 7.7% increase over this period, with e-commerce sales up 102.4%. This was vital for the business as the pandemic forced stores to be closed for four weeks during successive lockdowns in the nation, as well as lower traffic due to the slump in global travel.

"We have continued to deliver on our strategic priorities during the first half, achieving a robust performance against significant headwinds, further consolidating our position in luxury watches and demonstrating the unique, supply-driven qualities which underpin the resilience of our category and the strength of our business,” said Brian Duffy, chief executive officer.

The business did show some signs of hesitation for its future outlook, however, warning that its updated guidance “assumes some further negative trading impact from potential lockdown measures in January and February”.

Still, the company joins other UK firms that have voluntarily returned the furlough cash, with housebuilders Redrow (RDW.L), Barratt (BDEV.L) and Taylor Wimpey (TW.L) already doing so.

Brexit and the Fed are a boon to European markets

European markets had a positive open on Thursday as a Brexit deal appears increasingly in focus and US federal reserve chairman Jerome Powell outlined a cautiously optimistic outlook for the most powerful nation in the world.

The focus now firmly remains on the Bank of England’s rate decision coming later on Thursday.

London’s FTSE (^FTSE) opened up 0.5%. It’s continental peers were also in the green, with Germany’s DAX (^GDAXI) having gained 1.5% and France’s CAC 40 (^FCHI) up 0.6%.

US futures markets were heading higher. The S&P 500 (ES=F) was up 0.6%, while the Dow Jones (YM=F) tilted upward 0.5% and the Nasdaq (NQ=F) jumped 0.5%.

Asian markets were positive at market close. Hong Kong’s Hang Seng (^HSI) gained 0.7%, and Japan’s Nikkei (^N225) was higher 0.2%. The Shanghai Composite (000001.SS) headed upward 1.1%.

-With additional reporting from Oscar Williams-Grut and Tom Belger