Britain's FTSE 100 seen lower after PM May's Brexit deal crush

By Josephine Mason

LONDON (Reuters) - Britain's top share index was expected to open slightly lower on Wednesday after lawmakers defeated Prime Minister Theresa May's deal to leave the European Union by a crushing margin overnight, deepening political and market uncertainty.

The FTSE 100 was seen opening 3 points lower and underperforming its European peers, according to financial spreadbetters at IG, after Parliament voted 432-202 against May's deal, the worst parliamentary defeat for a government in recent British history.

Scores of her own lawmakers - both Brexiteers and supporters of EU membership - joined forces to vote down the deal.

Expectations for a muted stock market reaction to the news comes as sterling eked out small gains against the U.S. dollar in early dealings, with the sizable defeat for May seen forcing Britain to pursue different options, including a delay to the exit.

Sterling rallied more than a cent from the day's lows against the dollar after the vote on Tuesday night.

The blue-chips are often pressured by a stronger pound, as 70 percent of their income are generated overseas.

Kallum Pickering, senior economist at Berenberg, said he anticipates a cautious market on Wednesday ahead of a vote of confidence in May's government later in the evening.

"The potential for a softer Brexit outcome may neutralise any negative impact of higher uncertainty and the vote of no confidence," he said in a note.

Frankfurt's DAX is seen opening 36 points higher and Paris' CAC 40 will be flat, according to IG.

Recently, the FTSE 100 has moved in rare lockstep with the domestic currency, underscoring deepening worries about the fallout across Britain's financial markets and economy from the tumultuous negotiations for a Brexit deal.

Goldman Sachs economist Adrian Paul said in a note he reckons the vote has made a softer, later Brexit, or even no Brexit at all, slightly more likely.

"For the time being, we believe the market will be looking toward softer Brexit outcomes and GBP will benefit as a result," said Jordan Rochester, Normura foreign currency strategist, in a note.

(Reporting by Josephine Mason, Editing by Helen Reid and Darren Schuettler)