* FTSE 100 down 0.2 percent
* Pound surges on possible financial services Brexit deal
* BT has best day since May 2013 as outgoing CEO hails recovery plan
* Oil prices drag (Add details, updates prices)
By Julien Ponthus
LONDON, Nov 1 (Reuters) - UK shares fell on Thursday, snapping three days of gains, even after strong trading updates from BT and Smith & Nephew as optimistic news on Brexit led to a surge in the pound which acts as an accounting drag on blue chips’ foreign revenues.
London’s FTSE 100 ended down 0.5 percent, underperforming its European peers as sterling jumped 1.4 percent for it biggest one-day rise since January after reports that a deal is nearly done to give London-based financial services access to European Union markets after Brexit.
The currency was also briefly boosted after the Bank of England held interest rates unchanged as expected but hinted at slightly faster future rises if Brexit goes smoothly.
Another major drag to the British benchmark was falling oil prices and pushing index heavyweights BP and Royal Dutch Shell down by 4.4 percent for its biggest one day fall in two years and 2.3 percent respectively.
The latter reported soaring but below consensus profits in the third quarter.
“The FTSE was forced to give back some of its Halloween rally,” said Connor Campbell, an analyst at Spreadex, referring to the previous session’s gains.
Data showing that British factories suffered their worst month since just after 2016’s Brexit vote in October did little to lift morale.
Among Thursday’s fresh batch of third-quarter earnings also came encouraging news for equity investors. Broker Bernstein called BT’s figures “stellar”.
Shares shot up 9 percent to top the FTSE 100 for their best day since May 2013.
BT’s outgoing boss said the group’s recovery plan was delivering after more sales of high-end smartphones and cost savings across the business helped the telecoms company achieve higher-than-expected first half earnings.
“It’s early days, but this could be the sign of traction that investors have been waiting for,” said Alasdair McKinnon, fund manager of the Scottish Investment Trust, which owns shares in the broadband and telecom company.
Another clear winner, staging its best day in nearly four years, was medical equipment maker Smith & Nephew which jumped 6.4 percent after saying it expects its trading profit margin to be higher this year than last on better performance for its hips.
“This is a particularly strong performance in hips, suggesting the company is taking share,” analysts at Investec wrote.
Miner BHP Billiton rose 2.6 percent after it said it would buy back shares and pay a special dividend to return $10.4 billion to shareholders, sticking to a promise to hand back all of the proceeds from the sale of its U.S. shale business.
Just Eat was rewarded for serving up better-than-expected orders and expectations that 2018 revenues will be towards the top end of its 740 million pound ($952 million) to 770 million pound range. Its shares jumped 6.3 percent, their biggest daily gain for a year.
The more domestically focused FTSE 250 benefited from the stronger pound, rising 1.2 percent to a three-week high, led by Spire Health, up 12.4 percent and Just Group which jumped 11.5 percent. (Reporting by Julien Ponthus; additional reporting by Josephine Mason and Helen Reid; Editing by Matthew Mpoke Bigg)