* FTSE 100 closes 0.5 pct down
* PM May calls for early election
* Burberry and oil stocks weigh
* Mid-caps rise
(Adds detail and quote, updates with closing prices)
By Kit Rees
LONDON, April 19 Britain's top share index came
under pressure once again on Wednesday, giving up the gains it
had made in 2017 as sterling held close to a
six-and-a-half-month high after Prime Minister Theresa May
called for a snap general election.
The blue-chip FTSE 100 index was down 0.5 percent at
7,114.36 points by the close, bucking a broadly positive trend
on European markets, while UK mid-caps gained 0.6
May's surprise decision to hold an early election on June 8
sent sterling to its highest level since early October on hopes
that a stronger majority for May, who leads the opposition
Labour party by 21 points in opinion polls, will deliver a more
orderly exit from the European Union. Parliament approved the
election on Wednesday.
Sterling's rise, however, weighed on the FTSE 100's
predominantly dollar-earning constituents, which have enjoyed a
rally since the June referendum in which Britain voted to leave
Heavyweight oil companies Royal Dutch Shell and BP
fell, down 2.2 percent and 1.1 percent respectively, as
did precious metals miners Fresnillo and Randgold
Resources, both down nearly 3 percent.
Luxury goods company Burberry was the biggest
faller, dropping almost 8 percent, registering its worst daily
performance since October 2015 after reporting a slight slowdown
in its fourth-quarter comparable sales growth rate.
A slight slowdown in fourth-quarter like-for-like retail
from the third quarter may give the market pause for thought,
analysts at Liberum said in a note.
"News of a snap UK election has seen a strong rally in GBP.
Should this continue towards polling day, Burberry's own
FX-driven rally could disintegrate. We urge investors to take
profits and sell from a position of relative strength," they
Companies with a more domestic focus, however, such as
grocer Sainsbury, budget airline easyJet and
Royal Bank of Scotland, were among the biggest gainers,
all up by about 5 percent.
"The interesting second-order effect from the sterling move
is the inflation story because that's been a big concern,
particularly on the consumer-facing stocks ... (because) of what
it does to their input costs," said Peel Hunt strategist Ian
"Historically, the sectors that do relatively well when
sterling is rising tend to be ... the more domestic-focused
ones; so real estate, retail."
Britain's FTSE 250, constituents of which have greater
exposure to the UK economy, recovered some of the previous
session's losses and held close to record highs.
“The mid and small-caps were among the hardest hit after
Brexit. If we saw the pound strengthening and the UK consumer
continuing to be resilient, that would really benefit small and
mid-caps," said Henderson UK equity income and growth manager
Laura Foll, adding that Henderson is overweight on mid-caps.
Defence stock Cobham slumped 8.7 percent after 683
million new shares were added to trading in its rights issue.
(Reporting by Kit Rees, additional reporting by Helen Reid;
Editing by Mark Heinrich and David Goodman)