FTSE joins European bounce as Brexit outlook keeps sterling in check

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* FTSE 100 up 1.1 pct; mid caps up 1.2 pct

* Financials underpin index, oil stocks recover

* Faroe Petroleum surges above DNO bid price

By Danilo Masoni

MILAN, Nov 26 (Reuters) - Britain's top share index joined aEuropean rally on Monday as gains in sterling were curbed byuncertainty over next month's vote in parliament over the Brexitdeal that won backing on Sunday in Brussels.

The exporter-heavy FTSE 100, which makes around 70percent of its income abroad and tends to benefit from a weakerpound, rose 1.1 percent, while the more domestically focusedFTSE 250 index added 1.2 percent.

"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 shares inbanks HSBC, Lloyds and Barclaysrising between 1.6 and 2.4 percent after EU leaders finallysealed a Brexit deal, saying the package agreed with PrimeMinister 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 session.

Shares in Royal Dutch Shell and BP bothrose 1.5 percent, while energy services firm John Wood Groupgained more than 4 percent to lead gainers on the FTSEafter HSBC upgraded the firm to buy.

Faroe Petroleum surged 24 percent after Norway's DNOlaunched a hostile bid to buy the independent oil andgas company for around 608 million pounds.

Faroe Petroleum rose to 156.5 pence per share, topping the152 pence offered by DNO.

Among the few losers on the FTSE was Melrose, down5 percent after Sky News reported that the industrial companyhad got lower-than-expected bids for its Powder Metallurgy unit.(Reporting by Danilo Masoni; Editing by Janet Lawrence)