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Brexit bulletin: Bank of England’s ‘Super Thursday’

London - Bank of England governor Mark Carney is taking another run at crafting monetary policy for the post-Brexit vote era.

With the central bank passing on the opportunity to cut interest rates in the near-aftermath of the June 23 referendum, almost all of the economists surveyed by Bloomberg expect the benchmark to be cut today. The majority of those anticipate a halving of the rate to a record-low 0.25% - the first cut since 2009.

Options for doing more include expanding the bank’s £375bn ($499bn) quantitative easing programme, buying assets such as corporate bonds, extending credit easing or even giving policy makers longer to achieve their inflation target.

May message

Prime Minister Theresa May will try to reassure small and medium-sized companies today in the wake of Brexit, describing businesses that employ fewer than 250 workers as the “backbone” of the economy. She will seek their input on the negotiations and ask how the government can help them access opportunities in new markets. 

According to an Ipsos survey, 58% of adults in the European Union think Brexit was the wrong decision for the bloc. But not all of Europe’s businesses agree: among bigger companies reporting earnings today, Germany’s Siemens said it saw no impact from the Brexit vote on its UK investments but urged clarity from British politicians.

Finance battleground 

An emerging pawn in the post-Brexit battle for London’s financial services industry is the obscure back-office function of clearing, intended to bring more stability to trading in financial markets. 

Quitting the EU could endanger thousands of jobs at the clearing houses and their member banks if France and Germany carry through their threat to repatriate euro clearing, Will Hadfield and John Detrixhe of Bloomberg explain. The London Stock Exchange also warns Brexit may affect clearing volumes and fees.

No change for the elite

Europe’s political elite may be failing to heed the lessons of Brexit. Six weeks after voters rebuked the ruling class, in part because they felt disenfranchised from the economy, the establishment has reacted by carrying on as before. 

Former Bank of England governor Mervyn King has joined Citigroup, while former European Commission president Jose Manuel Barroso began advising Goldman Sachs. Meanwhile, departed UK prime minister David Cameron is facing criticism for nominating numerous aides for honours.“Anything that doesn’t show the government or public institutions in a good light merely confirms some of the attitudes that probably contributed to the Brexit vote,” Chris Roebuck of Cass Business School told Bloomberg’s Thomas Seal.

On the markets

UBS on Wednesday sold $1bn of the riskiest type of bank debt in Europe’s first sale of the bonds since the Brexit vote. The tender was the first in the $106bn junior bond market, which are the first to take losses in a crisis.

Overnight, Asian stocks advanced, rebounding from their worst day since the aftermath of the Brexit vote, as crude oil held onto its recovery.

The pound was little changed, as currencies across developed markets remain in a holding pattern ahead of the BoE’s decision and Friday’s US payrolls data.

And finally...

Londoners may find it harder to catch their breath if Brexit ends up weakening air-quality standards, according to S&P Global Inc. Inside the EU, the UK is legally bound to keep air pollution below regulatory thresholds. Once the country leaves, there’s no guarantee those limits will still be observed.

“This is a very serious issue for the UK,” Michael Wilkins, managing director of infrastructure ratings at S&P, said in a report on Wednesday. “It could be more difficult to hold the government accountable for air quality standards.”

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