French president François Hollande is opening the floodgates, promising tax cuts and a surge of investment. Fall-out from the coming British recession – he says – must be pre-empted. The timing is providential as he gears up for the French elections in May next year.  Italian premier Matteo Renzi has seized on the Brexit to try to push through a €40bn rescue for his banks.  They know that the radical Five Star Movement won Rome in an electoral earthquake last month, and has now pulled ahead of Mr Renzi’s ruling Democrats in national polls. The prospect of a Five Star government in charge of Italy after a make-or-break referendum in October is concentrating minds.  The European Commission has reluctantly kicked off the sanctions process against Spain and Portugal but is already starting to soften the demands.  All talk of pro-cyclical fiscal tightening in the UK has been dropped. The Business Secretary, Sajid Javid, is calling for a £100bn investment plan.  The Bank of England may cut rates to zero. Standard & Poor’s has pencilled in £100bn of quantitative easing over each of the next two years.  Taken together, the world’s authorities are opening the spigot, but it is far from clear whether even this will overcome the powerful deflationary forces.  Chris Iggo, from Axa, warns that a flattening yield curve in the global bond markets would normally be a forward indicator of recession, and it would be courting fate to assume that this time is different. The recent plunge in long-term yields in the US, Japan, Germany, France, and Britain, is astonishing.
Elite funds and banks are quietly amassing global equities and emerging market assets, betting that precautionary stimulus around the world will overwhelm any local damage in Britain and drive one last leg of this ageing financial cycle.