* FTSE 100 up 0.3%, FTSE 250 down slightly
* SIG tanks after profit warning, M&S whacked
* Galliford outshines midcaps (Updates with closing prices)
By Shashwat Awasthi and Muvija M
Jan 9 (Reuters) - London's main share index advanced on Thursday as chances of a full-blown crisis in the Middle East waned, but mid-caps lagged as SIG and Marks and Spencer fell after warning of lower annual results.
The FTSE 100 rose 0.3% on its best day in a week after U.S. President Donald Trump stepped back from more military action against Iran and Tehran signalled an end to retaliation.
"It looks like the shooting war is over for now, but there is always the potential for escalation at any point," Markets.com analyst Neil Wilson said.
"But the relative calm should mean the focus will come back to the economic data and the U.S.-China trade deal."
Among the top blue-chip gainers was British Airways owner IAG, which added nearly 3% after naming Iberia boss Luis Gallego as the replacement for long-time CEO Willie Walsh.
The FTSE 250 handed back initial gains and edged 0.04% lower as building materials supplier SIG slumped 21%, blaming its weak outlook on the slow pace of recovery in British and German construction markets.
It was SIG's worst day since Nov. 2018. Its peer Travis Perkins fell 3%.
Retailer M&S slid 11%, its biggest one-day fall in over seven months, after warning on margins. Its blue-chip rival Kingfisher dropped 2.9%.
"Competition in the Clothing & Home space is at fever pitch, and it's a battle M&S isn't winning," said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.
The retail gloom also engulfed greeting card specialist Card Factory, which tanked 30% to a lifetime low after saying subdued performance over Christmas would hit profit.
Industry data this week showed that Britain's supermarkets recorded the lowest sales growth over the Christmas trading period for five years and that was confirmed by trading updates from Tesco and John Lewis.
However, Tesco shares advanced 1% as near-flat Christmas sales still bettered its main rivals' performance. Bernstein analysts said the result was very strong, given a subdued market and pressure from discounters.
Galliford outperformed other mid-caps with a 5.2% rise, saying new construction contract wins after the sale of its residential business to Vistry Group, formerly Bovis Homes, had aided first-half performance.
(Reporting by Shashwat Awasthi in Bengaluru; Editing by Arun Koyyur)