UPDATE 2-London stocks post positive start to quarter; Brexit worries remain

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* British govt seeks to avoid full national lockdown
* EU takes action over UK's blow to Brexit bill
* Rolls-Royce falls on fresh capital raise
* Halfords surges after raising first-half profit outlook
* FTSE 100 up 0.2%, FTSE 250 gains 0.4%

(Updates to close)
By Shashank Nayar and Susan Mathew
Oct 1 (Reuters) - London-listed shares rose on Thursday on
hopes of more U.S. stimulus and signs that the British
government would not impose another sweeping national lockdown,
but a slide in oil stocks capped gains.
Markets globally held steady after the Trump administration
on Wednesday proposed stimulus measures worth $1.5 trillion,
including $20 billion of aid for the airline industry.
MKTS/GLOB
In Britain, Environment Secretary George Eustice said the
government was seeking to avoid a full national lockdown to
contain a resurgence in COVID-19 cases, in the interest of
preventing unemployment soaring into the millions. The more domestically focused mid-cap index .FTMC rose
0.4%, while the blue-chip FTSE 100 .FTSE edged up 0.2%.
Defensive plays such industrials .FTNMX2720 , utilities
.FTNMX7530 and healthcare stocks .FTNMX4530 were among the
top boosts as Brexit concerns remained.
The European Union launched a legal case against the United
Kingdom on Thursday for undercutting their earlier divorce deal
and a senior UK minister said differences remained in talks on a
trade agreement. "The first piece of good news is that...Brussels has not
shut down trade talks," said James Smith, developed markets
economist at ING.
"Instead, the EU has signalled it is pursuing legal action
against London, but this will take time and doesn't preclude a
deal being done in the meantime," he said, adding that the
Internal Market Bill was not necessarily a barrier to a deal,
and that there have been signs that negotiations have taken a
more positive turn.
The FTSE 100 has been range bound over the past month as new
restrictions and rising COVID-19 infections offset hopes for an
economic revival on the back of fresh stimulus measures.
Sentiment on Thursday was lifted as a survey showed British
factory activity grew for the fourth month in a row in September
and the sector cut the fewest jobs since before the COVID-19
lockdown.
Oil stocks .FTNMX0530 slumped 3.4% to a two-month low as
crude prices dropped more than 5%, with a rise in OPEC output
last month and rising coronavirus cases dampening the demand
outlook.
Among individual shares, Rolls-Royce RR.L dropped 10.2%
after the aero-engine maker said it planned to raise 2 billion
pounds ($2.6 billion) from shareholders, 1 billion pounds from
the bond market and secure further loans to rebuild its balance
sheet after the pandemic. Retailer Halfords HFD.L surged 31.5% to its highest level
since June 2019 after it raised its first-half profit outlook as
it continued to benefit from a cycling boom during the
pandemic.