Europe open: Stocks in the red on Brexit worries

European stocks were mostly lower on Wednesday after Bank of England warned that the risks of the UK’s Brexit had already begun to “crystallise”.

In the BoE’s financial stability report on Tuesday, Governor Mark Carney said the central bank will loosen UK banks’ requirements to hold extra capital to encourage continued lending after Britain voted to leave the EU.

“Bank of England Governor Mark Carney may well be the only adult in the room when it comes to managing the UK economy at the moment, as speculation rises about the prospect of a UK rate cut next week, there is little he can do to stop the contagion seeping into Europe’s sclerotic banking system,” said Michael Hewson, chief market analyst at CMC Markets.

“At the beginning of this year European banks were already facing a host of problems, including falling profits, a slowing global economy and negative rates reducing their ability to boost their profitability, at a time when a lot of them were being encouraged to boost lending to the wider economy as well as improve their capital buffers. Quite simply it isn’t possible to do all of them at the same time.”

Meanwhile in economic data, Germany factory orders unexpectedly fell in May. Orders dropped 0.2% year-on-year, compared to forecasts for a 0.9% rise and the previous month’s 0.4% decline.

Next up, Markit releases its purchasing managers’ index on Eurozone retail at 0910 BST. Later in the session, US services data from Markit and IM will be published at 1445 BST and 1500 BST respectively.

The main focus, however, will be the Federal Reserve’s minutes of its policy meeting on 15 June when the central bank decided to keep interest rates unchanged after a weak May job report and amid uncertainty leading up to the 23 June European referendum. While the Fed’s stance on interest rates may have changed since Brexit, the minutes will reveal more details behind the decided to leave policy on hold.

“The Fed is now unlikely to consider rate hikes in the coming months as it analyses the impact of Brexit but the minutes could still provide insight into how close they were to raising and how much of a deterrent the UK’s decision could be. For another hike to remain on the table this year, the jobs data will have to remain strong overall and rebound from last month’s disappointment," said Craig Erlam, senior market analyst at Oanda.

The US non-farm payrolls report will be released on Friday.

On the company front, Banca Monte dei Paschi di Siena shares recovered after the company said the European Central Bank is pushing the lender to draft a new plan aimed at reducing bad loans.

France’s Iliad SA was lower a day after saying it has agreed to create a fourth Italian mobile telecoms operator, paving the way for CK Hutchison Holdings to merge its 3 Italia with Vimplelcom's Wind.

easyJet was in the red after saying cancellations almost doubled in June to 852 compared to 487 for June 2015.