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UPDATE 2-Trade worries hit FTSE 100, banks slip on BoE plan

By Shashwat Awasthi

* FTSE 100 down 0.5%, FTSE 250 down 0.6%

* Trade worries extinguish earlier rally

* Centrica drops to lowest since Aug. 1998

* CYBG drags on mid-cap index after results (Adds news items, analyst comment, closing prices)

By Shashwat Awasthi

July 30 (Reuters) - London's FTSE 100 index ended lower on Tuesday, giving up earlier gains as the mood soured in response to worries over U.S.-China trade and as major British banks fell after the Bank of England issued a new plan to handle potential banking crises.

The main index shed 0.5%, but remained close to the near 11-month highs hit earlier after BP's stronger than expected profit.

The mid-cap FTSE 250 fell 0.6%, dragged down in part by a near 10% drop in Virgin Money-owner CYBG.

The blue-chip index followed Wall Street lower after U.S. President Donald Trump warned China not to wait for the 2020 U.S. presidential election to make a trade deal.

Big British banks, such as Barclays and RBS , fell after the BoE said banks would have to tell investors in 2021 if they could be closed down without disrupting financial markets.

EARNINGS DOMINATE

Corporate earnings were the main drivers behind most of the major stock moves on both UK indexes.

British Gas parent Centrica, whose earnings have been hit by a national cap on energy prices, dropped 19% to its lowest level in more than two decades as it cut its dividend and said its chief executive would step down.

"The company needs a new leader to take a grip of things... It's in the middle of a big changes in the sector and a significant restructuring so slashing the dividend whilst cash flow is uncertain is absolutely vital," Markets.com analyst Neil Wilson said.

Fresnillo fell nearly 18% after its profit dropped by more than two-thirds in the first half of the year due to a drop in production and higher costs.

Shares in some major exporting companies were unable to capitalise on sterling's plunge on no-deal Brexit worries.

Reckitt Benckiser fell 3.2% after cutting its annual revenue outlook, while tobacco stocks skidded after U.S.-based Altria forecast a steeper decline in industry cigarette volumes.

Mid-cap CYBG slipped 9.6% after it forecast its net interest margin would be at the lower end of its earlier view.

British Airways owner IAG fell 5.4% on the main index, while mid-cap peers Wizz Air and easyJet shed 4.1% and 5.6% respectively, after Germany's Lufthansa warned of a challenging European market in the near term. (Reporting by Shashwat Awasthi in Bengaluru; Editing by Saumyadeb Chakrabarty and Jane Merriman)