FTSE 100 manages small gains as May outlines Brexit Plan B

By Muvija M and Arathy S Nair

(Reuters) - British blue-chip shares eked out small gains as industrials were comforted by Prime Minister Theresa May's presentation to parliament of her European Union divorce deal Plan B, even as a stronger pound weighed on the index.

London's FTSE 100 <.FTSE> closed 0.03 percent higher after hitting near session lows with sterling gaining ground following May's comments that she would seek further concessions from the EU on a back-up plan to avoid a hard border in Ireland. The mid-cap index <.FTMC> ended the day flat.

Trading on Monday was muted as U.S. markets remained closed for Martin Luther King day and volumes in both British indexes were a little over half the 90-day average daily turnover.

UK shares outperformed European peers, where data showing the Chinese economy slowed at the end of last year weighed on sentiment.

Sterling <GBP=D3> hit session highs against the U.S. dollar after May promised to be more open with parliament in negotiating the country's future relationship with the European Union.

Industrial shares <.FTNMX2750> added 1.8 percent and hit their highest since early December, while an index of housebuilders <.FTNMX3720> erased session losses to close flat after May's reassurances on Brexit. Melrose <MRON.L> jumped 2 percent to the top of FTSE 100.

"EN ROUTE FOR ACCIDENTAL NO-DEAL"

"Just because you may not want a no-deal doesn’t mean you will avoid a no-deal. I think we are en route for an accidental no-deal. But the markets don’t seem to be pricing that in," CMC Markets analyst David Madden said, pointing to a stronger pound.

With roughly two months to go before Britain is due to leave the EU, May said she could not take a no-deal Brexit off the table as there was not yet an alternative, and the EU would not be unlikely to extend Article 50 without a plan to secure parliament's approval.

But May and other European Union leaders have a shared determination for Britain to leave the bloc with an agreement, her spokesman said on Monday.

On the corporate news front, London Stock Exchange Group <LSE.L> shares climbed 1.2 percent after a report that the company is interested in bidding for Norway's Oslo Bors <OSLO.NFF>.

Kingfisher <KGF.L> was the biggest blue-chip faller with a 4 percent drop after RBC cut its rating on the DIY retailer to "underperform", noting that the macro and housing backdrop remains unsupportive in the UK and France.

Miners <.FTNMX1770> were also weighing on the main index as a slowdown in the world's top metals consumer, China, stoked fears over demand and hurt copper prices.

The Brexit update overshadowed a slew of corporate news from midcaps.

Shopping mall operator Hammerson <HMSO.L> fell 3.4 percent, top drag on FTSE 250, after JP Morgan cut its rating to "Neutral".

William Hill <WMH.L> fell nearly 2 percent after the bookmaker said it would remodel its retail business after warning that full-year profit will fall 15 percent.

Takeaway ordering website Just Eat <JE.L> ended a choppy session with a 0.7 percent gain after saying its chief executive Peter Plumb was stepping down after just 16 months at the helm.

(Reporting by Muvija M and Arathy S Nair in Bengaluru, Editing by Helen Reid and Ed Osmond)