* FTSE 100 up 1.2 pct; mid caps up 1 pct
* Financials underpin index, oil stocks recover
* Faroe Petroleum surges above DNO bid price
* Telecoms rally on M&A news(Adds detail, updates prices)
By Danilo Masoni and Josephine Mason
MILAN, Nov 26 (Reuters) - Britain's top share index joined aEuropean rally on Monday as worries about Brexit eased after theweekend vote in Brussels and investors piled back into oil andfinancials and the battered telecoms sector rallied ondealmaking news.
The exporter-heavy FTSE 100 rose 1.2 percent, whilethe more domestically focused FTSE 250 index added 1percent
"Theresa May's Brussels success comes laden with somepotentially deal-sinking domestic caveats, namely the House ofCommons’ 'meaningful vote' expected to be held on 12thDecember," said Forex.com analyst Connor Campbell.
Financials gave the biggest boost to the FTSE with HSBC, Standard Chartered and Standard Life Aberdeenrising between 2.6 and 3 percent after EU leadersfinally sealed a Brexit deal, saying the package agreed withPrime Minister Theresa May was the best Britain will get.
Their gains also reflected strength in the broader Europeanbanking sector which rallied to reports that Italy couldlower its budget deficit target to avoid a disciplinaryprocedure from Brussels.
Oil stocks were also in demand as crude prices clawed backsome losses from a nearly 8 percent plunge the previous sessionamid easing worries about a glut.
Shares in Royal Dutch Shell and BP were up2.9 percent and 2.4 percent respectively, while energy servicesfirm John Wood Group gained 7.6 percent to lead gainerson the FTSE after HSBC upgraded the firm to buy.
"Eager buyers would do well to tread carefully, since itlooks like the occupant of the White House is still very keen ontalking down the oil price," said IG chief market analyst, ChrisBeauchamp.
Faroe Petroleum surged 27 percent after Norway's DNOlaunched a hostile bid to buy the independent oil andgas company for around 608 million pounds.
Faroe Petroleum rose to 159.6 pence per share, topping the152 pence offered by DNO.
Dealmaking also boosted Vodafone Group in afternoontrading after a Reuters report that the European Commission wasset to clear a merger in the Netherlands revived optimsim aboutpossible M&A activity in the hard-hit sector.
The European telecoms index shot up 3.3 percent onthe news.
Among the few losers on the FTSE was Melrose, down2 percent after Sky News reported that the industrial companyhad got lower-than-expected bids for its Powder Metallurgy unit.
In the small-cap index, Vectura Group slumped 10.2percent on news the company has dropped its asthma treatmentafter a trial failure.(Reporting by Danilo Masoni and Josephine Mason; Editing byJanet Lawrence)
