UPDATE 2-London stocks fall as Brexit, coronavirus concerns weigh

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* Johnson Matthey slips as half-year profit slumps

* Direct Brexit talks suspended after EU team member tests COVID positive

* Royal Mail jumps on raising annual revenue outlook

* Kingfisher dips as Q4 sales growth slows

* FTSE 100 down 0.8%, FTSE 250 falls 1% (Adds comment; updates share prices)

Nov 19 (Reuters) – London stocks slipped on Thursday, as uncertainty over a post-Brexit trade deal with the European Union and surging COVID-19 infections sparked fears of more damage to an already-faltering domestic economic recovery.

The blue-chip FTSE 100 index closed 0.8% lower, with chemicals maker Johnson Matthey Plc tumbling 5.6% after it posted a near 90% slump in half-year profit and refrained from providing an outlook for 2021.

Cyclicals such as banks, energy, and mining stocks were among the biggest drags to the index.

The domestically focused mid-cap FTSE 250 index ended 1% lower.

After jumping more than 13% in the last two weeks on optimism over a vaccine, the FTSE 100 index retreated this week on concerns that swiftly accelerating COVID-19 cases and a stalemate over a Brexit deal might derail a nascent economic recovery.

“The reality has hit home for investors that we are seeing greater disruptions especially in areas of Europe, which partly was to be expected, given that we are going into winter,” said Azad Zangana, senior European economist and strategist at Schroders.

“The FTSE 100 is a very unloved market right now, and once the stigma attached to the UK is removed by the certainty of a trade deal, we might see more of a return to normal in terms of investors putting some money back towards the UK.”

Chief Brexit negotiators suspended direct talks on Thursday after a EU team member tested positive for COVID-19, with a Finnish EU minister saying talks were at “critical stage” but could still succeed.

Outsourcer Mitie Group slipped 6.6%, after it posted a 35% fall in first-half profit and scrapped its interim dividend.

Home improvement retailer Kingfisher Plc fell 2.7% after saying fourth-quarter underlying sales growth has slowed so far.

Royal Mail Plc jumped 3.3%, after raising its annual revenue forecast due to an online shopping boost. (Reporting by Devik Jain in Bengaluru; Editing by Bernadette Baum)