A year after Brexit vote, European and UK shares diverge

* STOXX 600, FTSE 100 down 0.2 pct at close

* UK shares underperform European peers so far in 2017

* Financials, energy stocks fall
(Recasts, adds detail and quote, updates prices at close)

By Kit Rees

LONDON, June 23 (Reuters) – Another wobble in
commodity-related shares and dollar earners put pressure on
British blue chips on Friday, underscoring their
underperformance against continental European peers a year on
from Britain’s vote to leave the European Union.

Britain’s FTSE 100 was down 0.2 percent at its
close, weighed down by weakness in health care and mining stocks
– large-cap dollar earners.

Friday marked the one-year anniversary of Britons voting in
a referendum by a narrow margin to quit the EU, a shock outcome
which then sent sterling, British and European stocks into a
tailspin.

While stocks have recovered sharply from their slump in the
immediate aftermath, in U.S. dollar terms, British stocks
continue to lag peers in Europe and elsewhere as a cloudy
outlook for sterling dented appetite among foreign investors.

“Brexit itself, I don’t think, has had much of an effect on
the market, but what has had an effect has been the fall in
sterling,” said Paul Mumford, senior investment manager at
Cavendish Asset Management.

Mumford said the inconclusive outcome of this month’s
national election in Britain was also now weighing on sterling.

“Because of the uncertainty that might have arisen from the
election result, it may be that sterling is going to stay down
longer than we thought,” Mumford said.

The pan-European STOXX 600 index was down 0.2
percent as falls among financials, pharma firms and energy
shares weighed.

Elsewhere, broker changes helped drive price action, with
British broadcaster ITV rising more than 3 percent after
Morgan Stanley upgraded it to “buy”, citing its attractive
valuation.

“Timing is always tricky but typically the right moment to
buy TV stocks is when advertising starts to improve, even if
this is just on a second derivative basis (i.e. it starts to
become less bad),” Morgan Stanley analysts said in a note.

Shares in pizza delivery firm Domino’s Pizza were
among the biggest fallers, down 2.8 percent near a two-year low
after a downgrade from Berenberg.

Berenberg analysts said Domino’s faced potential issues
ahead, including falling behind in terms of technology as well
as food inflation putting pressure on franchisee margins.

Insurer NN Group was the biggest faller, down nearly
4 percent after Dutch watchdog KiFid said that the firm must
compensate one its clients in a mis-selling case.

Finnish and Swedish markets were closed for a holiday.

(Reporting by Kit Rees, Editing by Vikram Subhedar and Gareth
Jones)

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