By Shivani Kumaresan
(Reuters) - UK's domestically-exposed stock index pulled back on Monday from its highest level in 10 months on fears that Britain will stage a disorderly exit from the European Union, with banks and real estate taking a sharp beating.
The mid-cap FTSE 250 ended 1.25% lower, logging its worst day in about six weeks, as negotiators entered last ditch efforts to bridge stubborn differences over a post-Brexit trade deal to avoid a messy divorce at the end of the month.
The export-heavy FTSE 100 was up about 0.1% as no-deal Brexit worries pressured the pound. [GBP/]
Economically-sensitive banks dropped 2.8% while homebuilders, vulnerable to Brexit-related developments, also tumbled with Berkeley, Barratt Development, Persimmon (LON:PSN), Taylor Wimpey (LON:TW) down between 2% and 7%.
While a deal is clearly the preferred outcome, its impact on both UK equities and the pound is unlikely to be that great, said Rupert Thompson, chief investment officer at Kingswood.
"After all, any deal will be a bare-bones one and is still likely to lead to short-term disruption to the economy."
British and EU negotiators have been haggling for weeks over fishing rights, ensuring fair competition for companies and ways to solve future disputes. Investment bank JPMorgan (NYSE:JPM) said odds of a no-trade deal exit had risen to one third from 20%.
Still, the FTSE 100 is on track to record its biggest quarterly gain since 2010 after being boosted by hopes that a working COVID-19 vaccine would spur a global economic recovery next year.
In company news, British IT company Micro Focus jumped about 14% as Goldman Sachs (NYSE:GS) raised its rating to "buy" flagging signs that slowing revenue deceleration was on the horizon.
ContourGlobal gained about 2.6% as the British power generator said it was buying a portfolio of gas-fired power plants, including one each in Texas and New Mexico, in a deal valued at $837 million, marking its entry into the lucrative U.S. market.