FTSE 100 dips as pound rallies; Ocado surges on M&S deal talks

By Shashwat Awasthi and Muvija M

(Reuters) - Britain's FTSE 100 fell on Tuesday as miner Fresnillo slumped after poor results and the sterling rallied on growing signs of a Brexit delay, though online grocer Ocado soared after confirming joint venture talks with Marks & Spencer.

The FTSE 100 ended 0.5 percent lower after steep losses in the morning as the index's stocks, which book much of their earnings in dollars, were marred by the pound surging to four-month highs.

The midcaps added 0.1 percent as a 10 percent surge in Travis Perkins on better-than-expected full-year adjusted earnings helped cushion a slump in Metro Bank triggered by a cash call.

The pound gained on reports that British Prime Minister Theresa May would rule out a no-deal Brexit and delay the March 29 deadline for exit from the European Union.

Some European Union officials said the bloc would be ready to approve a short Brexit delay should Britain need more time to ensure parliamentary ratification of their divorce agreement.

Ireland's top share index, one of the barometers for Brexit sentiment, advanced 0.8 percent.

"We've been advising investors to add to domestically focused stocks since the end of 2018 in a bet on an orderly, delayed Brexit. There's more to go because the market is very underweight," said Emmanuel Cau, head of European equity strategy at Barclays.

Ocado shares surged 12 percent on the main index after confirming talks with M&S to form a joint venture. M&S shares added 3.2 percent while Ocado marked its best day since last May when it announced a deal with Kroger.

Precious metals miner Fresnillo slipped 8.3 percent as 2018 pretax profit slumped by more than a third and it flagged an "unwelcome degree of uncertainty" from the China-U.S. trade dispute.

British Airways owner IAG dipped 4.3 percent after index provider MSCI said it plans to delete the stock from its Spanish index.

Housebuilders advanced after five sessions of losses with Persimmon rising 2 percent following results and CEO appointment.

The rise comes after the sector was hit in the last session on reports of Persimmon coming under regulatory fire for its practices under the "Help to Buy" scheme.

On the midcaps, Metro Bank tanked 16 percent on plans to raise £350 million in a shareholder cash call, a month after announcing a sharp rise in exposure to higher-risk mortgages.

But building materials supplier Travis Perkins climbed to an eight-month high as its results were well-received. That also helped Kingfisher, which owns DIY retailer B&Q, rise by 2 percent.

Babcock skidded 5 percent after it said restructuring its European business for Brexit would cost £10 million a year.

(Reporting by Shashwat Awasthi and Muvija M in Bengaluru; Editing by Robin Pomeroy and Andrew Cawthorne)