Brexit concerns weigh on FTSE as two top banks back UK equities

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details)

* FTSE 100 falls for third day in a row

* But FTSE outperforms worse drops elsewhere in Europe

* Deutsche, JP Morgan stay 'overweight' on UK stocks

* G4S (Copenhagen: G4S.CO - news) falls following Orlando shooting

By Sudip Kar-Gupta

LONDON, June 13 (Reuters) - Britain's blue-chip shares index fell for the third day in a row on Monday but outperformed other European bourses, as widespread unease about the country's looming European Union membership vote weighed on markets.

The blue-chip FTSE 100 index closed down 1.2 percent at 6,044.97 points.

This was less than falls of 1.8 percent on Germany's DAX and on the pan-European STOXX 600 index, as two leading banks stayed "overweight" on UK equities.

While the FTSE is down 3 percent this month, it is still some 10 percent above its earlier 2016 low point reached back in February.

Both Deutsche Bank and JP Morgan argued that the UK market could outperform Europe if Britain did vote to leave the EU in its June 23 referendum next week, as UK shares would be propped up by a fall in sterling.

A drop in the pound would make British shares more affordable for overseas investors, and also benefit many of the internationally-focused companies that dominate the FTSE 100.

That view was echoed by Marino Valensise, Head of Multi-Asset & Income at Baring Asset Management.

"We would expect sterling to weaken in case of Brexit and multinational company shares to perform better than domestic ones," he said.

The FTSE 100 index has outperformed Europe so far in 2016. The FTSE is down 3 percent while the pan-European FTSEurofirst 300 and STOXX 600 indexes have fallen some 10 percent.

Among mid-cap stocks, G4S dropped 5 percent in the wake of Sunday's fatal Orlando nightclub shootings, carried out by one of the global security company's employees.

While the majority of investors still expect next week's in/out vote to result in Britain deciding to stay in the EU, opinion polls remain divided.

According to betting odds, the chances that Britain will vote to leave the EU increased sharply on Monday to 36 percent, the highest level since the referendum was announced by Prime Minister David Cameron four months ago.

"We see further volatility as we approach the referendum," said Roger Mitchell, head of dealing at Cornhill Capital.

ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.

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Mike Dolan, Markets Editor EMEA. (Additional reporting by Kit Rees; Editing by Gareth Jones)