UPDATE 2-Trade fears, Shell earnings knock 1% off FTSE

* FTSE 100 down 1.1%, FTSE 250 down 0.5%

* China-U.S. trade fears return

* Shell dips following Q3 update

* Lloyds also weighs on blue-chips

* Crest Nicholson slips after profit warning
(Adds more detail, analyst quote, closing prices)

By Muvija M and Shashwat Awasthi

Oct 31 (Reuters) - The FTSE 100 blue-chip stock index
dropped more than 1% on Thursday, under pressure from
results-driven falls in Shell and Lloyds and the latest tensions
over the U.S.-China trade situation.

The main index ended 1.1% lower on its worst day in
a month, lagging its European counterparts, while losses in the
domestically focused FTSE 250 were capped at 0.5% in
response to stronger sterling.

A report that Chinese officials have doubts over sealing a
comprehensive long-term trade deal with the United States
diverted attention away from the Fed's widely-expected interest
rate cut.

"This could easily turn out to be a ploy by Beijing to try
and gain leverage over the U.S., but for now dealers are content
to trim their equity positions," CMC Markets analyst David
Madden said.

Aside from the trade uncertainty, losses among blue-chips
were down to Shell, the index's most valuable company,
which tumbled more than 4% after warning that uncertain economic
conditions could slow its $25 billion share buyback.

Homebuilder Crest Nicholson dropped 5.1% on the
midcap index after warning that its annual profit could plunge
by as much as a third.

Crest highlighted hits from weak consumer confidence and
flattening prices as a result of Brexit nerves, and blue-chip
housebuilders Persimmon, Barratt and Berkeley
each lost about 1%.

Lloyds shed 1.4% after missing market expectations
for third-quarter earnings.

Precious metals miner Fresnillo topped the main
board with a near 3% rise, as investors turned to safe haven
gold in response to the renewed U.S.-China trade uncertainty.

The FTSE 100 has recorded monthly loss in October, only the
third month this year it has done so, as a rally in sterling
-mostly driven by the risk of a 'no-deal' exit subsiding - hurt
shares in companies that are big exporters.

But the mid-cap index marked its second straight month of
gains.

Gainers among the FTSE 250 were led by specialist media
services firm Future Plc which jumped 11.3% to its
highest since December 2000 following a proposed acquisition of
UK-based print and digital magazine publisher TI Media.

Shares in British Airways owner IAG and telecom
group BT rose 2.2% and 1.4%, respectively, to outperform
the main index after they reported earnings.
(Reporting by Muvija M and Shashwat Awasthi in Bengaluru;
Editing by Arun Koyyur/Shounak Dasgupta/Jane Merriman)