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Foreign Minister Mohamed Kamel Amr and Finance Minister Mumtaz al-Saeed confirmed they would stay on after emerging from a meeting with Kandil, who is due to formally unveil his cabinet on Thursday.

Osama Saleh, the head of the General Authority for Investment, said he had been appointed investment minister. Osama Kamal, head of the Egyptian Petrochemical Holding Co, said he had been appointed oil minister.

A little-known technocrat, Kandil was irrigation minister in the outgoing cabinet led by Prime Minister Kamal al-Ganzouri - who was appointed by the military council and a premier under ousted leader Hosni Mubarak. Kandil has said he would put qualifications before political allegiances when choosing his cabinet members.

The government formation ends a month long wait for the first administration of the Mursi era. The Muslim Brotherhood politician, who was sworn in on June 30, has been criticized for the amount of time it took him to name his prime minister.

Faced by an economy hit by 18 months of political instability, the new government will need to move fast to address acute economic problems including a looming balance of payments crisis and unaffordable state borrowing costs.

(Writing by Tom Perry, editing by Jon Boyle)

* Euro/sterling rises, more gains may depend on ECB

* Weak data raises chances of more BoE easing in coming mths

* UK interest rates, QE target seen unchanged this week

By Jessica Mortimer

LONDON, Aug 1 (Reuters) - A drop in UK manufacturing activity pushed the pound to its lowest in more than two weeks against the euro on Wednesday as investors became nervous about the possibility of more monetary easing by the Bank of England.

Coming after recent data showing an unexpectedly sharp contraction in the UK economy during the second quarter, a survey showed Britain's manufacturing sector shrank at its fastest rate in more than three years in July.

The euro was up 0.5 percent against the UK currency to 78.94 pence, its strongest since mid-July as the survey dealt a blow to hopes the country may come out of recession over the summer.

Although the BoE is widely expected to leave interest rates and its quantitative easing target unchanged when it announces its next policy decision on Thursday, a raft of recent weak economic data have increased the chances of more easing in the coming months.

"The market is debating whether interest rates could come down in the UK and that is one route through which the raft of recent weak data is moving the currency," said Adam Cole, global head of currency strategy at RBC.

He said a recent change in the market's perception that the central bank was unlikely to take interest rates below their current record low 0.5 percent now means that the pound is now much more vulnerable to weak economic data than it was.

The minutes to the BoE's policy meeting in July showed policymakers were softening their stance on cutting interest rates, though any move was not likely to come for several months. Most analysts say any rate cut would not happen before November, when the current quantitative easing programme ends.

RBC's Cole added that sterling "seems to be losing its status as a safe haven status" and was no longer rallying when markets are more averse to taking on risk.

Against the dollar, sterling was down 0.35 percent at $1.5618, having hit a 6-day low of $1.5602.

Wednesday's weak purchasing managers index (PMI) on manufacturing followed figures from Nationwide showed British house prices fell at their fastest annual pace in nearly three years last month and added to sterling selling.

Morgan Stanley earlier revised their UK growth forecasts lower and now expect a 0.5 percent contraction in GDP during 2012. They forecast sterling to fall to $1.46 against the dollar in the first quarter of 2013.

FOCUS ON ECB

The euro was also supported by the possibility that the European Central Bank could take bold action to tackle the euro zone debt crisis this week, despite strong German opposition to the bank buying government debt in the secondary market to lower Spanish and Italian borrowing costs.

"The PMI numbers were awful and sterling got hit by that," said Richard Driver, currency strategist at Caxton FX. "But against the euro, we expect sterling's losses to be temporary as the common currency's rally will fade."

Analysts said most currencies were likely to trade in a tight range ahead of the ECB decision on Thursday. The meeting is expected to overshadow decisions by the BoE and the U.S. Federal Reserve (due later on Wednesday) after last week's pledge by ECB President Mario Draghi to do "whatever it takes" to protect the euro.

If the ECB delivers bold measures, it could boost investor appetite for taking on risk, helping sterling against the dollar, but if it disappoints it could lead to sharp falls in currencies perceived as higher-risk. The euro is also likely to weaken in that case. (Additional reporting by Anirban Nag; Editing by Toby Chopra)

The government already has powers to force a deposit-taking bank to be wound down in an orderly way and without needing taxpayer help.

The financial services minister Mark Hoban said on Wednesday the government wants similar powers over parts of the non-banking financial system.

Sectors being looked at include insurers, investment firms, clearing houses and payments systems such as those provided by banks for credit and debit transfers.

The government published a consultation paper ahead of legislative proposals.

"This consultation underlines the government's commitment to maintaining the UK's position as a pre-eminent global financial centre, while also ensuring that the financial services sector is able to provide essential services to the wider economy without posing a risk to financial stability," Hoban said.

EU TOO SLOW

The EU is scrutinising a law for a resolution regime covering investment firms and banks but the timing of its adoption is uncertain. The UK government "intends to prepare to legislate domestically on a more accelerated timetable".

There will also be a full resolution regime for UK incorporated parent firms of systemic investment firms and deposit-taking institutions.

Britain only has a special administration regime for investment firms and the UK arm of U.S. broker MF Global was the first firm to be subject to this regime.

The Treasury said it would shortly start a separate review of obstacles to the timely return of client assets and money to investors from a failed firm. Investigators into MF Global are searching for $1.6 billion in missing customer funds.

The EU is due to propose a law giving supervisors powers to wind down a failing clearing house, but Britain said it wants to push ahead earlier and will legislate domestically first.

The UK law would allow the Bank of England to step in and ensure continuity in critical clearing services.

Central bankers published a draft blueprint on Tuesday to force clearing houses, such as LCH.Clearnet in London, to show how they could be wound down in an orderly way or kept going if they got into trouble.

LESS CLEAR CUT

Turning to insurers, the government said a failure in the sector currently leads to a "run-off", whereby a firms stops writing new business and existing policies mature over time.

The case for a specific resolution mechanism for insurers is not clear cut but the current insolvency framework should be reviewed, the consultation paper said.

Global insurance supervisors are thrashing out criteria for deciding which of the world's biggest insurers must undergo tighter supervision to avoid them getting into trouble in the first place.

The government said it was also undecided on whether a resolution regime was needed for other types of market infrastructure such as exchanges and trading platforms, trade repositories, payment systems or securities settlement systems.

The failure of even part of the payments system, as seen recently at Royal Bank of Scotland, affects millions of customers. The government suggests two approaches - strengthening existing insolvency rules or a new resolution framework - or possibly a mix of solutions.

(Reporting by Huw Jones; Editing by Helen Massy-Beresford)