By Josephine Mason
LONDON (Reuters) - Britain's top share index was expected to have a muted start on Wednesday, edging slightly up after lawmakers defeated Prime Minister Theresa May's deal to leave the European Union by a crushing margin, deepening market uncertainty.
FTSE 100 futures were up 0.1 percent at 0711 GMT and underperforming their European peers after parliament voted 432-202 against May's deal, the worst parliamentary defeat for a government in recent British history.
Scores of her own lawmakers - both Brexit supporters and those favouring EU membership - joined forces to vote down the deal.
The cautious stock market reaction came as sterling gyrated between positive and negative territory against the U.S. dollar, with the sizable defeat for May seen forcing Britain to pursue different options, including a delay to the exit.
The currency was flat at $1.2857 at 0714 GMT after rallying more than a cent from the day's lows against the dollar after the vote on Tuesday night.
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Blue-chip stocks are often pressured by a stronger pound, as 70 percent of their income is generated overseas.
Kallum Pickering, senior economist at Berenberg, said he anticipated a cautious market on Wednesday ahead of a vote of confidence in May's government later in the evening.
"The potential for a softer Brexit outcome may neutralise any negative impact of higher uncertainty and the vote of no confidence," he said in a note.
Futures in Frankfurt's DAX and Paris CAC 40 futures were up 0.5 percent.
Recently, the FTSE 100 has moved in rare lockstep with the domestic currency, underscoring deepening worries about the fallout across Britain's financial markets and economy from the tumultuous negotiations for a Brexit deal.
Goldman Sachs economist Adrian Paul said in a note he reckoned the vote had made a softer, later Brexit, or even no Brexit at all, slightly more likely.
"For the time being, we believe the market will be looking toward softer Brexit outcomes and GBP will benefit as a result," said Jordan Rochester, Normura foreign currency strategist, in a note.
(Reporting by Josephine Mason, Editing by Helen Reid and Jon Boyle)