UPDATE 2-FTSE cheers easing in U.S.-Iran worries; mid-caps miss out

* FTSE 100 up 0.3%, FTSE 250 down slightly

* SIG tanks after profit warning, M&S whacked

* Galliford outshines midcaps
(Updates with closing prices)

By Shashwat Awasthi and Muvija M

Jan 9 (Reuters) - London's main share index advanced on
Thursday as chances of a full-blown crisis in the Middle East
waned, but mid-caps lagged as SIG and Marks and Spencer fell
after warning of lower annual results.

The FTSE 100 rose 0.3% on its best day in a week
after U.S. President Donald Trump stepped back from more
military action against Iran and Tehran signalled an end to
retaliation.

"It looks like the shooting war is over for now, but there
is always the potential for escalation at any point,"
Markets.com analyst Neil Wilson said.

"But the relative calm should mean the focus will come back
to the economic data and the U.S.-China trade deal."

Among the top blue-chip gainers was British Airways owner
IAG, which added nearly 3% after naming Iberia boss
Luis Gallego as the replacement for long-time CEO Willie Walsh.

The FTSE 250 handed back initial gains and edged
0.04% lower as building materials supplier SIG slumped
21%, blaming its weak outlook on the slow pace of recovery in
British and German construction markets.

It was SIG's worst day since Nov. 2018. Its peer Travis
Perkins fell 3%.

Retailer M&S slid 11%, its biggest one-day fall in
over seven months, after warning on margins. Its blue-chip rival
Kingfisher dropped 2.9%.

"Competition in the Clothing & Home space is at fever pitch,
and it's a battle M&S isn't winning," said Sophie Lund-Yates,
equity analyst at Hargreaves Lansdown.

The retail gloom also engulfed greeting card specialist Card
Factory, which tanked 30% to a lifetime low after
saying subdued performance over Christmas would hit profit.

Industry data this week showed that Britain's supermarkets
recorded the lowest sales growth over the Christmas trading
period for five years and that was confirmed by trading updates
from Tesco and John Lewis.

However, Tesco shares advanced 1% as near-flat Christmas
sales still bettered its main rivals' performance. Bernstein
analysts said the result was very strong, given a subdued market
and pressure from discounters.

Galliford outperformed other mid-caps with a 5.2%
rise, saying new construction contract wins after the sale of
its residential business to Vistry Group, formerly
Bovis Homes, had aided first-half performance.

(Reporting by Shashwat Awasthi in Bengaluru;
Editing by Arun Koyyur)