UPDATE 2-Worries over global trade, Italy lead FTSE 100 lower

* FTSE 100 down 0.9%, FTSE 250 down 0.5%
* Trade worries, Italy politics weigh on main index
* Firmer sterling hurts exporters
* BHP falls after warning on demand
* Sainsbury's among handful of blue-chip gainers

(Adds news items, analyst comment, updates to closing prices)
By Shashwat Awasthi and Indranil Sarkar
Aug 20 (Reuters) - London's main index ended firmly in the
red on Tuesday after new U.S.-China trade jitters and political
instability in Italy took down heavyweight firms across sectors,
while exporter stocks dipped as the pound gained after German
Chancellor Angela Merkel's comments on the Brexit process.
The FTSE 100 .FTSE gave up earlier gains and shed 0.9%,
though investors still hoped for fresh stimulus from central
banks and governments to beat back the risk of recession. The
FTSE 250 .FTMC lost 0.5%.
Asia-focused banks such as HSBC HSBA.L dragged the
blue-chip index lower after the U.S. affirmed its tough stance
on Chinese telecoms giant Huawei HWT.UL , which investors saw
as a risk of further escalating tensions, while oil majors Shell
RDSa.L and BP BP.L also slipped. O/R
UK-focused banks such as Barclays BARC.L also dropped more
than 1% as Italian Prime Minister Giuseppe Conte resigned after
coalition leader Matteo Salvini had called for snap elections
earlier this month. "The Italian political news isn't a shock, but nonetheless
it chips away at investor confidence," CMC Markets analyst David
Madden said.
The main index, which is on course for its worst month in
four years, fell after two sessions of solid gains. It had
incurred steep falls last week when signs from the bond market
that in the past have pointed to recession damaged global
markets.
Constituents of the FTSE which book a major chunk of their
earnings in dollars, including Unilever ULVR.L and Diageo
DGE.L , fell as sterling advanced after Merkel called for
practical solutions regarding the post-Brexit Irish border.
"There could be a lot more negativity for the pound as
September unfolds," Markets.com analyst Neil Wilson warned, as
Prime Minister Boris Johnson attempts to convince the European
Union to tweak a Brexit deal agreed with his predecessor Theresa
May or risk a no-deal divorce.
In news-driven moves, mining heavyweight BHP BHPB.L shed
1.7% as a warning that global economic headwinds could hit
demand for iron ore and copper took the shine off its largest
annual profit in five years. But supermarket chain Sainsbury's SBRY.L climbed 3% after
data showed it recorded the smallest sales decline among
Britain's big four grocers in the latest 12-week period. Rival
Tesco TSCO.L slipped 1.8%. Mid-cap pub operator Mitchells & Butlers MAB.L surged 8%
to a more than 3-1/2 year high after Canaccord Genuity upgraded
the stock following recent buyouts of peers Greene King GNK.L
and Ei Group EIGE.L .