UPDATE 1-UK stocks recoil as Brexit euphoria cools; Sophos soars

* FTSE 100 down 0.4%, FTSE 250 down 1.2%

* UK indexes ease after Friday's rally

* Sophos jumps on buyout deal, leads peer Avast higher

* Royal Mail drops as threat of Christmas strike looms
(Adds news items, analyst comments, updates share prices)

By Shashwat Awasthi

Oct 14 (Reuters) - London-listed companies with exposure to
the domestic economy retreated on Monday after last week's
dramatic surge amid signs that more work was needed to sort out
a Brexit deal, while cybersecurity firm Sophos surged 38% after
a buyout offer.

The FTSE 250 shed 1.2%, handing back part of the
more than 4% gain it had recorded in the previous session, which
was its best in nearly a decade.

Britain and the European Union said over the weekend that a
lot more work would be needed to secure a Brexit agreement.

JP Morgan's UK domestic plays index, tracking
about 30 UK stocks that make all or most of their revenue at
home, pulled back nearly 2% after jumping almost 8% in the
previous session.

Blue-chip banks like Lloyds and RBS and
housebuilders skidded, dragging the FTSE 100
0.4% lower.

"The weekend mood music from EU leaders appears to have gone
some way to puncturing some of the optimism about the prospects
for a quick solution," CMC Markets analyst Michael Hewson said.

The main index was also hurt by a drop in miners
after disappointing imports and exports data from
top metals consumer China.

Mid-cap Sophos Group scaled its highest level in
more than a year at 586.8 pence, after private equity firm Thoma
Bravo said it would take the company private in a 583 pence per
share deal.

Shares of its peer Avast also rose 3.6%.

Sentiment around the U.S.-China trade situation also
tempered somewhat after a rally in global stocks last week on
signs of progress in negotiations that culminated with President
Donald Trump outlining the first phase of a deal and suspending
a threatened tariff hike.

"The 'Phase I' deal did not really address the most
sensitive issues in the trade dispute... The deal also didn't
remove any of the existing tariffs on Chinese imports," said
Hussein Sayed, Chief Market Strategist at FXTM.

"If you're a U.S. or a Chinese business, such developments
will not help deciding on your future plans. That's why I like
to call the current agreement a trade truce rather than a trade
deal."

Shares of online grocer Ocado skidded 3.7%, as a
pullback in Brexit optimism was compounded by a rating cut and
bearish view from JP Morgan.

Royal Mail, relegated to the FTSE 250 earlier this
year, slipped 4% after a report https://www.thetimes.co.uk/article/royal-mail-boss-rico-back-faces-threat-of-christmas-strike-chaos-d3mm0gf2j
that the company was facing the threat of an employee strike
over Christmas.
(Reporting by Shashwat Awasthi in Bengaluru; Editing by Bernard
Orr)