Market watchers anticipate 0.25 per cent cut in Bank of England's base rate
British stocks dipped Wednesday after data suggested an economic hit from the Brexit vote just ahead of a key Bank of England policy decision.
Stocks were mixed elsewhere in Europe, while US stocks gained and Japanese stocks tumbled again on worries about government stimulus.
Data monitoring company Markit's preliminary composite purchasing managers' index (PMI) in Britain for the services industry sank to 47.4 points in July, down from 52.3 in June. A reading under 50 indicates shrinkage.
The data revived worries about the surprise British vote in June to exit the European Union, sending the FTSE down 0.2 per cent.
"This week's manufacturing PMI report is the latest in a long list of survey data which shows that the vote to leave the EU has caused significant uncertainty, and negative shock is on the way," said Hargreaves Lansdown economist Ben Brettell.
Market watchers expect the Bank of England Thursday to slash interest rates to a record-low 0.25 per cent and to potentially boost its bond-buying stimulus program.
"The market anticipates at least a quarter-point cut in the base rate, but an expansion of asset purchases and a 'bias to ease' would not be surprises," said economist Larry Hatheway at asset manager GAM.
In the US, payroll firm ADP reported that private US companies added 179,000 jobs in July, slightly better than expected. The data came two days ahead of the government's official July jobs report.
Analysts said US stocks were also boosted by higher oil prices, which lifted most petroleum-linked shares that helped boost the S&P 500 by 0.3 per cent.
Paris fell 0.2 per cent and Frankfurt rose 0.3 per cent after Markit said eurozone economic data managed a small gain in July despite Brexit.
Weak stimulus hits Nikkei
Japan's Nikkei dropped 1.9 per cent, its second straight decline, as gripes about a surprisingly modest stimulus package continued to dent sentiment.
Japanese banking shares tanked on fears about the difficulty lenders face making money in a negative interest rate era as their bottom lines come under pressure.
Mitsubishi UFJ Financial Group closed 3.9 per cent lower, rival Sumitomo Mitsui Financial Group dived 4.3 per cent and Mizuho Financial Group lost 3.3 per cent.
Banking giant HSBC ended 1.8 per cent higher in Hong Kong and up more than four percent in London after it announced a $2.5 billion stock buyback and said it would maintain its dividend.
In Milan, Fiat Chrysler shares surged over eight percent following a press report claiming that the auto giant is talking to Samsung about selling its car parts unit Magneti Marelli.
In the US, Time Warner climbed 2.7 per cent after announcing it was taking a 10 per cent stake in Hulu, a streaming video provider that is ramping up as a competitor to sector leader Netflix.