UPDATE 2-FTSE 100 drops ahead of Brexit talks, U.S. presidential debate

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* Pub owners fall on possibility of extended shutdown
* Ferguson surges on restoring dividend payouts
* Brexit negotiations to resume later in the day
* FTSE 100 down 0.5%, FTSE 250 lost 1.1%

(Updates to close)
By Shashank Nayar and Susan Mathew
Sept 29 (Reuters) - The FTSE 100 fell on Tuesday on worries
about a stalling economic recovery and surging COVID-19 cases,
with pub owners sliding on the prospect of further curbs as
another round of Brexit negotiations began.
European Union negotiators signalled they were willing to
begin work on a joint legal text of a trade deal with Britain,
the Times reported, as the three days of talks got under way.

The global mood was also subdued ahead of Tuesday's U.S.
presidential debate between incumbent Donald Trump and Democrat
challenger Joe Biden. MKTS/GLOB
The blue-chip FTSE 100 index .FTSE dropped 0.5%. The
mid-cap index .FTMC slipped 1.1% and was on track to record
its worst month since March.
Banks .FTNMX8350 and oil stocks .FTNMX0530 were among
the biggest decliners, while defensive play such as utilities
and industrials rose.
A raft of stimulus measures had led a FTSE 100 rally from
March lows, but the index was on course for its second monthly
decline in five as fresh coronavirus-linked restrictions and
Brexit uncertainties dulled sentiment.
Among bright spots, plumbing parts distributor Ferguson
FERG.L rose 6% after it restored its dividend as
cost-reduction measures helped it report a 4.1% rise in annual
profit. Retailer B&M European Value Retail BMEB.L rose as
brokerages cheered a strong first half. "The latest update
...confirms it is well-positioned for tougher economic times,"
said Russ Mould, investment director at AJ Bell, also tipping it
as a prime merger candidate for British supermarket retailer
Asda.
Baker Greggs GRG.L lost 8% after saying it expects trading
to remain below normal for the foreseeable future due to the
pandemic. Pub owners JD Wetherspoon JDW.L , Marston's MARS.L ,
Mitchells & Butlers MAB.L and Restaurant Group RTN.L all
slumped more than 5% after a junior minister said Britain's
nightclubs may have to stay shut until a COVID-19 vaccine is
developed.