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* FTSE 100 up 0.3 pct
* Mid-caps up 0.7 percent,
* Tesco reverses gains after sales figures
* Industrials drive mid-caps while housebuilders decline
By Helen Reid
LONDON, June 16 (Reuters) - Defensive strength supported the FTSE on Friday but it remained on course for its widest weekly loss in two months after a week of political uncertainty and jitters about the resilience of the consumer engine of the UK economy.
British and European stocks had sold off on Thursday as fears grew around the squeezed British consumer and the durability of stronger macroeconomic data which had spurred cyclical sectors higher.
The main FTSE 100 benchmark gained 0.4 percent by 1000 GMT, underperforming the European benchmark, Italian and French stocks.
UK mid-caps pulled out of Thursday's nosedive to gain 0.7 percent, outperforming the larger stock index, though they were still headed for a loss on the week, taking them to a three-week losing streak.
Concerns around the more domestically exposed mid-cap companies came to a head on Thursday when furniture store DFS warned on profit, triggering a sharp sell-off among consumer-exposed stocks.
Investors said valuations among mid-caps, which hit a fresh record high as recently as two weeks ago, were also putting off prospective buyers.
"It's not panic stations, but you can see why there might be a consolidation," said Ian Williams, head of economics and strategy at Peel Hunt.
"Mid-caps have held up a lot better than people thought they would. So although underlying earnings are good and the bottom up news is good, valuations mean there's not that many more compelling cheap opportunities," he added.
"The incremental buyer is not there anymore, and the markdown could continue before they appear again."
Concerns around the reflation trade were also leading investors to shift away from the sectors most geared to economic growth, and towards defensive stocks, naturally favouring the less cyclicals-heavy FTSE 100.
"Whilst corporate earnings have continued to improve and look healthy however the increase in equity market valuations mean that a lot of this improved outlook is reflected in prices," said Edward Park, investment director at Brooks Macdonald.
"Fuller valuations mean that equities are responding more nervously to the recent softer global data," he added.
Uncertainty around UK politics, a week after a shock general election result, had also generated jitters around domestic stocks.
"Political uncertainty puts pressure on the domestically focused mid-cap companies who struggle to make well informed investment decisions with such an unclear outlook," said Park.
British American Tobacco and Unilever were among the large-cap drivers of the timid rebound, as investors turned to safer, high dividend-yielding stocks.
Tesco shares reversed course, erasing early gains to trade down 0.5 percent, after weak international same store sales overshadowed the retailer's strongest UK sales growth in seven years.
"Tesco's results show that the small ticket, less discretionary spending is proving quite resilient," said Williams, adding that the inflation-driven squeeze on consumers would likely weigh more on bigger-ticket spending such as furniture, as evidenced by DFS's warning.
Energy stocks lent some support after oil edged up off its seven-week lows.
But Anglo American fell 1 percent to an 8-month low after some analysts said new mining regulation in South Africa could hit miners' margins.
Driving the mid-cap recovery were industrials firms with less exposure to the domestic economy, with engineers Cobham , IMI Melrose Industries and Meggitt among top gainers.
Meanwhile companies exposed to housebuilding and real estate kept falling, with Bovis Homes, Crest Nicholson , Savills and Countryside all down. (Reporting by Helen Reid)