Drop in Diageo takes the fizz out of Britain's FTSE

* FTSE 100 down 0.1 pct

* Diageo (LSE: DGE.L - news) falls after posting lower sales

* RSA buoyed by sale of Baltics, Poland operations

* London stock market closed on Friday and Monday

By Tricia Wright

LONDON, April 17 (Reuters) - Britain's benchmark equity index edged lower on Thursday, reversing the previous session's advance, led by a drop in drinks group Diageo's shares.

The blue-chip FTSE 100 index, which rose 0.7 percent on Wednesday, was down 4.96 points, or 0.1 percent, at 6,579.21 points by 1046 GMT.

A 3.9 percent fall from Diageo, after weakness in its Chinese market led to lower third quarter sales, knocked the most points off the index.

"The slowdown in Asia and China is hurting a lot of these big companies, such as Diageo, which have based a lot of their future growth on these markets," Brown Shipley fund manager John Smith said.

"We're comfortable with holding Diageo for the long-term, as it has good brands, but for the short-term, it's clearly suffering," he said.

RSA Insurance (LSE: RSA.L - news) bucked the weak market trend, rising 2.1 percent after selling operations in the Baltics and Poland for a total of 348 million euros ($481 million), the latest step by Chief Executive Stephen Hester to turn the insurer around.

"Very good deal for RSA. The transactions value RSA's businesses in the Baltics and Poland above market multiples," Atif Latif, director of trading at Guardian Stockbrokers, said.

"Moreover, they (help) RSA to reach its target of at least 300 million pounds in non-core asset disposals by end-2014. These transactions confirm the positive view on the group's ongoing restructuring."

The FTSE 100, which rose 14.4 percent last year, is down by 2.5 percent since the start of 2014.

The index reached a peak of 6,867 points in January this year, its highest since early 2000, but it has since dropped on concerns over a slump in emerging markets and fears over fallout from tensions between Russia and Western powers over Ukraine.

Strand Capital managing director Kyri Kangellaris saw the FTSE stuck in a range of 6,500-6,850 points, as long as it failed to break above its January high of 6,867 points and last year's peak of about 6,876 points.

"We're looking rangebound for the near term," he said. ($1 = 0.7243 euros) ($1 = 0.5955 British pounds) (Additional reporting by Sudip Kar-Gupta; Editing by Louise Ireland (Other OTC: IRLD - news) )