UPDATE 2-London's FTSE 100 falters, outcome of U.S.-China talks awaited

Britain's main index was dragged back to its six-week low on Thursday as markets remained wary of an imminent tariff hike as trade talks between the United States and China resumed in Washington. The internationally focused FTSE 100 lost 0.9 percent and was set for its steepest weekly fall since early December, with industrials, miners and Asia-exposed stocks leading the drop.

The midcaps gave up 1.3 percent, lagging the main index, whose losses were capped due to gains across so-called defensive stocks, which are deemed safer bets at times of economic troubles. U.S. President Donald Trump late on Wednesday accused China of breaking the deal they had reached in trade talks, while a rise in U.S. tariffs is set to be triggered on Friday.

That left global markets unnerved as it would fall right in the middle of a two-day meeting between Chinese Vice Premier Liu He and Trump's top trade officials. "Traders are running scared about the prospect of an escalation in the U.S.-China trade dispute. The U.S. is set to up the ante ... and that has prompted dealers to cut and run," CMC Markets analyst David Madden said.

"Europe is getting hit in the cross-fire because when the two largest economies in the world engage in a trade war, it bodes badly for everyone." Luxury brand Burberry, which is vulnerable to a hit to the Asian economy, gave up 2 percent.

Britain's biggest broadband operator BT Group slipped 4 percent on its worst day this year after weak results and concerns of a dividend cut as its new boss vowed to roll out full-fibre broadband to 15 million homes by the mid-2020s. Energy supplier Centrica, oil major BP and insurer Admiral all dipped as they traded ex-dividend, heavily weighing on the blue-chip bourse.

However, an upbeat first-quarter update showing a rise in net written premiums helped insurer RSA inch 2.2 percent higher. Housebuilder Barratt rose 2.4 percent after a strong forecast despite Brexit-induced slowdown in the housing market, bucking the trend set by its peers Taylor Wimpey and Persimmon this year.

However, supermarket group Morrisons lost 1 percent after it blamed political and economic uncertainty for a slowdown in its quarterly sales growth. Metro Bank slumped 8.3 percent to a new record low on the midcap index after shareholder advisory group ISS advised investors to abstain in votes on the re-election its CEO and chairman.

Small-cap Superdry ended a day of choppy trading with a slight gain as markets took in founder Julian Dunkerton's efforts to rebuild the fashion brand, as well as another profit warning. (Reporting by Muvija M in Bengaluru; Editing by Alison Williams)

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