FTSE steadies after US tariff decision; tobacco stocks weigh

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* FTSE 100 down 0.1 pct

* BAT drops as Morgan Stanley (Xetra: 885836 - news) starts at equalweight

* Ocado leads gainers as quarterly sales grow

* Takeover deal boosts Jardine Lloyd Thompson (Frankfurt: 894294 - news)

MILAN, Sept 18 (Reuters) - The UK's top share index steadied in morning trade on Tuesday, weighed down by losses among tobacco stocks, although investors took in their stride Washington's decision to go ahead with 10 percent tariffs on another $200 billion of Chinese goods.

The FTSE 100 was down 0.1 at 0825 GMT, while mid-caps rose 0.3 percent, tracking higher European markets.

The latest U.S. duties spared smart watches and other consumer products, but U.S. President Donald Trump warned of duties on more products if China took retaliatory action.

"Indeed, the actual range of goods hit with tariffs was less than feared ... Exemptions have turned this into something of a 'sell the rumour, buy the fact'-type scenario for investors," said Neil Wilson, analyst at Markets.com

The FTSE remains down 5.1 percent so far this year, however, as a recovery in sterling on growing expectations of a Brexit deal has weighed on the exporter-heavy index.

In early deals on Tuesday, the pound slipped from Monday’s six-week highs, which were hit following reports of progress on the Irish border question.

The biggest drag on the FTSE on Tuesday was tobacco firm BAT , which fell 2.1 percent after Morgan Stanley started covering the stock with an equalweight rating. Its rival Imperial Brands (LSE: IMB.L - news) fell 1.5 percent.

"At these low levels, at this discount valuation, after this period of underperformance, BAT should be a full-house buy. It certainly ticks a lot of boxes. However, a combination of new challenges and some familiar ones leaves us on the sidelines," said an analyst at the U.S. investment bank.

Ocado was the biggest FTSE gainer, up 3 percent.

The online supermarket said retail sales growth slowed a touch in its latest quarter, though it was in line with the group's guidance for the full year.

"As commerce migrates online, the winners will be those with access to advanced tech and logistics platforms," said Peel Hunt analysts, affirming their buy rating on the stock

"Ocado’s proprietary technology provides better customer service, higher efficiency, greater margin potential, and is now being licensed to third parties across the globe as a pick and shovel play on ecommerce," they added.

Miners were broadly higher, with shares in Glencore (Amsterdam: GX8.AS - news) , Rio Tinto (Hanover: CRA1.HA - news) and BHP trading up between 0.6 and 1.8 percent. Fresnillo (Frankfurt: A0MVZE - news) was up 1.5 percent, supported by an RBC double upgrade to "top pick".

Among mid-caps, Jardine Lloyd Thompson soared 31 percent after U.S. financial services group Marsh & McLennan Companies agreed to buy the UK broker for about 4.3 billion pounds.

A disappointing update sent shares in private hospital operator Spire Healthcare (Frankfurt: S00.F - news) down 5.3 percent. (Reporting by Danilo Masoni; Editing by Kevin Liffey)