Europe stocks fall back into the red as post-Brexit rally cools, oil slips

European stocks fell back into negative territory on Thursday, as a rebound seen in U.K. stocks following the Brexit vote lost steam and a renewed drop in oil prices weighed on sentiment.

The pan-European STOXX 600 extended losses, off 0.7 to 0.8 percent, with all sectors posting losses.

London’s FTSE index was off 0.7 percent in early trade, while the U.K.’s domestically focused FTSE 250 index slipped 0.6 percent. Meanwhile, the French CAC fell 0.7 percent while the German DAX fell 0.7 percent.

Despite uncertainty over the U.K. and European Union’s future relationship after the country voted last week to leave the bloc, markets in the region rallied on Tuesday and Wednesday, with the FTSE 100 reclaiming all of its post Brexit losses at Wednesday’s close.

However, signs that the rally was starting to slow down showed in several markets on Thursday. Looking at currencies, the euro was down against the dollar, sterling and yen, while the British pound came off the highs it saw in its previous session, trading roughly flat against the dollar, at $1.342.

Investors will be watching a speech by Bank of England Governor Mark Carney at 4 p.m. London time, when he is expected to address concerns over the U.K.’s decision to leave the EU.

Meanwhile, on the oil front, both Bent and U.S. crude fell over 1 percent each on Thursday, as Nigeria’s production outlook improved. Brent and U.S. WTI were hovering around $49.85 and $49.15 respectively. Metal prices were mixed overall, however, basic resources was one of the worst performing sectors, with ArcelorMittal, Anglo American and BHP Billiton all posting sharp declines.

Despite lower trade in Europe, stocks in Asia were mostly higher following a positive session on Wall Street, where the Dow Jones industrial average closed up nearly 285 points in its best percentage gain since March 1.

‘No single market a la carte’ for UK: Tusk

On the Brexit front, the heads of 27 EU member states met on Wednesday without the U.K. to discuss the bloc’s next move following the referendum. In a statement by Donald Tusk, President of the European Council, he said there was a “calm and serious discussion” about the consequences of the vote and reiterated that there would be no negotiations with the U.K on any future relationship until the country formally notified the EU of its intention to withdraw.

He also said that the U.K. could not “cherry-pick” in any future talks. “Leaders made it crystal clear today, access to the single market requires acceptance of all four freedoms, including the freedom of movement. There will be no single market a la carte,” he said in a statement.

Meanwhile, Scotland’s First Minister Nicola Sturgeon said on Wednesday she was given a “sympathetic” hearing in Brussels where she made her case for finding a way to keep Scotland in the EU, Reuters reported.

Deutsche Bank, Santander fail Fed stress tests

In individual stock news, U.S. bank subsidiaries of Deutsche Bank and Santander have failed the U.S. Federal Reserve stress tests again with U.S. regulators flagging up “broad and substantial weaknesses” in their capital planning. Deutsche Bank was off over 4 percent in early European trade.

Elsewhere in the banking sector, Unicredit sank to the bottom of Europe’s benchmarks, off 5.4 percent, after UBS and Morgan Stanley cut their price targets on the stock.

Elsewhere, Monsanto has asked Bayer to increase its takeover offer, reportedly demanding an extra $10 to $15 a share, according to unnamed sources cited by German business daily Handelsblatt. “Insiders” also told the paper that the mega merger between the two agro-chemical giants had been thrown into doubt by the Brexit vote. Bayer shares slipped more than 1 percent.

On the data front, the U.K.’s June inflation rate and final first quarter GDP data is due on Thursday.

Source: CNBC