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* FTSE 100 up 0.2 pct
* UK outperforms European shares as sterling slides
* Ultra Electronics plummets after profit warning
* JP Morgan downgrade sends Coca Cola HBC down
By Helen Reid
LONDON, Nov 13 (Reuters) - British shares rose, outperforming European benchmarks, as exporters benefited when the pound fell amid reports of a rebellion among Conservative MPs against the leadership of Prime Minister Theresa May.
Export-oriented companies drove the FTSE 100 up 0.2 percent by 0820 GMT, but bank stocks suffered as sterling dropped.
Sterling weakened after the Times newspaper reported on Sunday that 40 Conservative lawmakers had agreed to sign a letter of no confidence in May - just short of the 48 needed to force a leadership vote.
Rory McPherson, head of investment strategy at PSigma, said he had taken down his equity and gilts exposure and switched out of domestic companies and into large-caps, to benefit from likely falls in sterling in the event of a leadership election.
Dollar-earners Unilever and Astrazeneca led gains. Oil majors Royal Dutch Shell and BP rose as well, also helped by the currency translation.
The political uncertainty hit financials, however. RBS , Lloyds, HSBC, Standard Chartered and Barclays all declined.
Retailers were once again the weakest part of the market, after a survey by payments company Visa found British shoppers reined in their spending by the most in four years in October.
Sainsbury’s and Marks & Spencer fell 0.8 to 1 percent.
“A lot of companies close to the consumer have guided downwards in terms of outlook for the UK,” McPherson said. Although mid- and small-caps have outperformed this year, he saw those more domestic-focused areas as uncertain and risky.
Analysts have been downgrading their earnings estimates for small-cap companies, indicating potential weakness ahead for the best-performing part of the UK stock market this year.
Overall, “earnings season has been reasonably strong, with companies surprising to the upside and growth at almost 8 percent,” McPherson added.
Defence contractor Ultra Electronics was the latest in a string of British companies to issue a profit warning. Its shares plummeted 24 percent to an eight-year low after it forecast a weaker second half and its CEO departed.
Liberum analysts cut their estimates for the company and removed a planned acquisition of U.S. company Sparton from their calculations because of uncertainty about its completion.
They added, however, that better order intake and the outgoing CEO’s replacement helped support their “buy” recommendation on the stock.
Defence contractors BAE Systerms and Babcock also sank 2.5 to 4.5 percent.
A dowgrade by JP Morgan to “neutral” sent Coca Cola HBC shares down 5.7 percent.
JP Morgan analysts said investors in the bottling company should take profits and await a better entry point after a potential deal to buy a stake in Coca Cola Beverages Africa, an announcement of which they expect in the next few months.
“However, we suspect accretion for CCH from a deal could be lower than previously anticipated given potential recent deterioration of profitability at CCBA,” they added.
Reporting by Helen Reid, editing by Larry King