Britain's FTSE snaps losing streak, retailers drives gains

* FTSE 100 up 0.2 pct

* More bullish mood supports gains

* Retail sales data surprises, boosts sterling

* Next (Frankfurt: 779551 - news) shines after trading update

* IG (Frankfurt: A0EARV - news) drops, analysts point to regulatory worries (Updates prices)

By Helen Reid

LONDON, March 23 (Reuters) - British shares turned up on Thursday after a two-day losing streak as markets turned more bullish and retail sales data indicated more robust consumption.

The blue-chip FTSE 100 index rose 0.2 percent but underperformed the broader European market, up 0.9 percent, as the stronger pound held back its constituents whose earnings are mainly in foreign currencies.

Sterling hit a one-month high after British retail sales for February beat all economists' expectations in a Reuters poll, rising by 1.4 percent from January, though the figure for the quarter was in decline.

Retailers were among top sectoral gainers. Clothing retailer Next was up 8.6 percent and the top FTSE gainer in heavy volume, posting its best gains in nine months after it maintained its guidance for 2017-18 from January when it issued a surprise profit warning.

Peer M&S was also a top gainer, up 3.7 percent.

The mid-cap index was up 0.9 percent. Results drove big moves in individual stocks.

Safety (Shenzhen: 300523.SZ - news) and medical company Halma (Frankfurt: 865047 - news) was Europe's second biggest gainer, up 6.5 percent after it posted strong orders growth. Its shares had their biggest one-day gain since November 2015.

Investec (LSE: INVP.L - news) analysts said the results were good enough to see a re-rating of the stock, which has suffered as investors rotated to cyclicals.

Analysts at Liberum, however, saw it being further pressured: "Halma remains at an elevated premium to the sector ... despite a wobble in the Trump rally in recent days, we believe reflation is a multi-year cycle and see further compression of Halma's defensive premium."

Shares (Berlin: DI6.BE - news) in online gambling company GVC rose 5.4 percent in heavy volume, among top Europe-wide gainers, after the firm said it would pay a second special dividend for 2016 on the back of strong trading.

Online trading company IG Group however was down 5 percent, a top faller after posting a 3.8 percent drop in quarterly revenue.

IG said regulatory uncertainty had had no impact on its business so far. Britain's financial watchdog, the FCA, has sought to tighten controls on the spread-betting market.

"We continue to see the outcome of the FCA's consultation as the biggest risk to IG," said analysts at Liberum. "In the absence of any clarity about what new regulation looks like, the business is impossible to forecast at this stage and therefore we maintain our 'unrated' rating."

Dixons Carphone (Frankfurt: CWB.F - news) was also among top mid-cap gainers. The stock joined the FTSE 250 on Monday after being demoted from the blue-chip index.

Demoted stocks tend to see increased trading in the days after transitioning as passive index-tracking funds modify their positions to adapt to new constituents. ($1 = 0.7996 pounds) (Editing by Catherine Evans)