UK shares fall on hard Brexit fears

British firms more exposed to the domestic economy took a hit on Tuesday after Prime Minister Boris Johnson's hard line in talks with the European Union rekindled fears of a hard Brexit, while NMC Health plunged on Muddy Waters' short attack.

Johnson will use his control of parliament to outlaw any extension of the Brexit transition period beyond 2020 - his boldest move since winning a large majority in last Thursday's election, and one that spooked financial markets.

That pushed the midcap FTSE 250 down more than 1% on its worst day in more than two months. The index had touched successive all-time highs in the last two sessions after Johnson's election victory.

However, London's main index FTSE 100 eked out a 0.1% gain, lifted by trade-sensitive stocks amid optimism around a proper agreement between China and the United States.

Oil majors BP and Shell along with HSBC were the biggest boost.

Weighing on the index was Unilever's 7% drop, its steepest one-day decline in more than a decade, after cutting its 2019 sales growth view.

NMC Health Plc also capped gains after losing nearly one-third of its value.

Finablr, which was founded and co-chaired by Bavaguthu Raghuram Shetty - also the founder and co-chairman of NMC Healthcare, dropped 10.8%, with traders citing a read-across from NMC.

JPMorgan's basket of London-listed companies that make their cash in domestic markets dropped 2.2%, having soared more than 9% since Friday over the election euphoria. An index of housebuilders shed 2.4%.

"The reality check of the possibility of a no-deal Brexit, while still over a year away, has tempered some of the enthusiasm from last Thursday's election result," CMC Markets analyst Michael Hewson said.

The steepest faller among midcaps was Senior Plc, which makes parts for Boeing Co's 737 MAX jets, tumbling 11% on its worst day in over three years after the US planemaker's decision to suspend production of the MAX jets.

Shares of other Boeing suppliers as well as those of airlines also slipped, with British Airways owner IAG and engine maker Rolls-Royce shedding more that 2% each.

Meanwhile, blue-chip banks Lloyds and RBS tumbled 5.9% and 3% respectively after failing to impress in the 2019 stress test, while new capital rules are expected to hit their investor payout plans.

Petrofac fell 6.6% after the oilfield services provider forecast lower annual revenue.