UK stocks recoil as Brexit optimism fades; buyout spurs Sophos

(Reuters) - London-listed companies with exposure to the domestic economy retreated on Monday as last week’s euphoric optimism gave way to doubts over whether a timely Brexit deal could be clinched, while cybersecurity firm Sophos surged 36% after a buyout offer.

Traders look at financial information on computer screens on the IG Index trading floor in London, Britain February 6, 2018. REUTERS/Simon Dawson/Files

The FTSE 250 .FTMC ended slightly off the day's lows but still shed 0.6%, handing back part of the more than 4% gain it had recorded in the previous session which was its best in nearly a decade.

Britain and the European Union said over the weekend that a lot more work would be needed to secure a Brexit agreement.

JP Morgan's UK domestic plays index .JPDEUKDM, tracking about 30 UK stocks that make all or most of their revenue at home, pulled back nearly 1%. It had jumped almost 8% on Friday, its best day since the basket was created nearly three years ago.

Blue-chip banks like Lloyds LLOY.L and Barclays BARC.L and housebuilders .FTNMX3720 skidded, dragging the FTSE 100 .FTSE 0.5% lower.

“On balance I feel the situation here is still fairly unpredictable... I think it’s far from clear we have a pathway yet,” said Paul O’Connor, head of the UK-based Multi-Asset Team at Janus Henderson.

The main index was also hurt by a drop in miners .FTNMX1770 after disappointing imports and exports data from top metals consumer China.

Mid-cap Sophos Group SOPH.L scaled its highest level in more than a year at 586.8 pence, after private equity firm Thoma Bravo said it would take the company private in a 583 pence per share deal.

Shares of its peer Avast AVST.L also rose 2.6%.

Sentiment around the U.S.-China trade situation also tempered somewhat after a rally in global stocks last week on signs of progress in negotiations that culminated with President Donald Trump outlining the first phase of a deal and suspending a threatened tariff hike.

“We welcome it but it’s a very fragile truce. The fact that it wasn’t written down is the most important thing. It shows what a challenge it is to converge on a hard agreement,” O’Connor said.

Ad firm WPP WPP.L, which lost 4% in the previous session after French rival Publicis PUBP.PA cut its sales view for the second time, ended 2.8% higher.

Royal Mail RMG.L, relegated to the FTSE 250 earlier this year, slipped 2.4% after a report here that the company was facing the threat of an employee strike over Christmas.

Car dealership chain Pendragon PDG.L, whose stock has nearly halved in value this year, climbed 10%. Automotive News reported here Pendragon had named interim Executive Chairman and former AutoNation AN.N COO Bill Berman as interim CEO.

GRAPHIC: Share performance of Sophos and Avast vs FTSE 250 since 2018 -

Reporting by Shashwat Awasthi in Bengaluru, additional reporting by Josephine Mason in London; Editing by Bernard Orr and Ed Osmond