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* FTSE 100 down 0.1 pct
* Next leads retailers up after Christmas trading surprise
* U.S.-exposed stocks dented by dollar's decline
LONDON, Jan 3 (Reuters) - Retailers stole the spotlight among UK stocks on Wednesday after Next delivered a strong Christmas update, as the FTSE 100 edged down from record highs.
Britain's main stock index dipped 0.1 percent, weighed down by financials stocks and consumer staples.
Next shone, however, jumping 8 percent to the top of the index after its trading update surprised investors, with a sales beat driving the company to upgrade its full-year profit forecast.
Cheery results from the first UK retailer to report on the crucial Christmas season caused a rally in retail stocks across the market, delivering relief to investors in a sector faced with significant challenges.
Next's update was in stark contrast to the start of 2017 when the retailer issued a profit warning and its shares sank. Wednesday gain brought it back to November levels before a third-quarter sales miss.
"The Next share price rollercoaster continues," said Mike van Dulken, head of research at Accendo Markets.
"Managements update-by-update tinkering of guidance and sharp share price reactions only goes to reinforce how shareholders remain at the mercy of the UK consumer from one season to the next and exposed to short-termism."
The main non-food retailers drove the market, with Marks & Spencer up 2 percent while Primark owner ABF gained 2.6 percent.
Mid and small-caps also jumped on the retail rally and the more domestically-focused indexes rose 0.2 percent each.
Fashion retailer N Brown rose 7 percent to the top of the FTSE 250, and shares in small-cap department store Debenhams rose 3.8 percent.
Oil majors Royal Dutch Shell and BP, still feeling the glow from a remarkably strong start to the year for crude prices, also delivered a boost.
But the FTSE 100 stayed negative as the weightier financials and consumer staples sectors wilted.
Heavyweights Diageo, Imperial Brands and British American Tobacco fell 0.5 to 1 percent. The highly U.S.-exposed firms were dented by the decline in the dollar which sank to a near four-month low.
Financials were led lower by HSBC and Standard Chartered, the most internationally-exposed of the UK-listed banks which also suffer from a weaker dollar.
EU regulatory reforms under the MiFID II market directive that came into force on Wednesday had little early impact on the market, traders said.
Some suggested the wide-ranging new rules could distract investors from their trading desks as they adjusted to the change.
(Reporting by Helen Reid; editing by John Stonestreet)