GLOBAL ECONOMY WEEKAHEAD-Carney steps into the Brexit breach again

Fri Jul 8, 2016 10:42am EDT
 
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By Padraic Halpin

DUBLIN, July 8 (Reuters) - Brexit worries are set to dominate the coming week, with Bank of England Governor Mark Carney stepping into the policy breach once more as Britain begins a two-month wait to find out the identity of its next Prime Minister.

Data from the United States and China will meanwhile give an indication of how the world's top economies were placed on the eve of Britain's shock June 23 vote to quit the European Union.

The referendum result has thrust Britain into its worst political crisis of modern times and raised fears about global growth and stability that have roiled financial markets.

Casualties include Italy's banks, whose 360 billion euros of bad debt is one-third of the euro zone total. Their shares are down almost 60 percent this year, with selling having accelerated after the Brexit vote.

Rome is negotiating desperately with Brussels over a plan to recapitalise its lenders with public money, limiting the losses for bank investors which are required by EU rules.

Seen as a steady hand amid the political chaos, Carney has suggested interest rate cuts and more stimulus are likely from the Bank of England, whose Monetary Policy Committee meets on Thursday.

A Reuters poll on Tuesday suggested policymakers would wait until August to make any move but with data on Friday showing consumer sentiment slumping, and fears of a recession rising, the Bank runs a risk of disappointing markets.

"A plunge in consumer confidence and evidence of markedly reduced business sentiment has enhanced the case for interest rates to be cut as soon as Thursday," said Howard Archer Chief UK & European Economist, IHS Global Insight   Continued...