UPDATE 2-FTSE down on trade, Italy jitters; UK GDP shock hits midcaps

* FTSE 100 down 0.4%, FTSE 250 down 0.2%

* Trade worries, Italy shock hurt main index

* Poor UK GDP data drags mid-caps lower

* WPP climbs after Q2 update

* On The Beach hammered after warning on results (Adds news items, analyst comment, updates share prices)

By Shashwat Awasthi

Aug 9 (Reuters) - London's FTSE 100 slipped on Friday as a mix of worries over the U.S.-China trade dispute and political turmoil in Italy weighed on heavyweight banks and miners, while the mid-cap index fell after a surprise downturn in Britain's economy last quarter.

The FTSE 100 gave up 0.4% to end its worst week in three months with a 2% drop. The domestically-focused FTSE 250 handed back earlier gains to end 0.2% lower.

Miners were hit as President Donald Trump said he was not ready to make a trade deal with China, the world's largest metals consumer. Financial stocks dropped after Italy's ruling coalition collapsed and League party leader Matteo Salvini called for early elections.

However, losses were capped by a 7.5% surge in ad firm WPP after better-than-expected organic sales performance in the second quarter.

After posting gains in June and July, the FTSE 100 is on course for its biggest monthly fall since October, as headlines around escalating tensions between Washington and Beijing dominate news.

A 6% post-earnings jump in gambling firm William Hill and drugmaker Hikma was not enough to support mid-caps, which dipped as Britain's economy shrank for the first time since 2012 in the second quarter.

"Any way you cut it, a 0.2% contraction in the second quarter is pretty disastrous news," Spreadex analyst Connor Campbell said. "It is the economic manifestation of the country's Brexit anxieties."

On The Beach slumped more than 14%, its worst day in more than a year, after the online travel agent warned annual performance would miss its own forecasts.

AIM-listed Burford Capital, whose shares tanked 46% earlier this week after short-seller Muddy Waters criticised its accounts and took a short position in the fund, jumped almost 12% after its directors bought shares in the company. (Reporting by Shashwat Awasthi in Bengaluru; Editing by Anil D'Silva, Shounak Dasgupta, Kirsten Donovan)