The FTSE 100 <.FTSE> ended the day down 0.03 percent, while mid-caps <.FTMC> rose 0.4 percent, tracking higher European markets after Washington decided to slap 10 percent tariffs on another $200 billion of Chinese goods, and Beijing retaliated.

Beijing's retaliation was less harsh than feared and caused just a temporary blip in stock markets which recovered fast.

Mark Haefele, chief investment officer at UBS Wealth Management, said in a note: "A less-than-proportional round of retaliation would likely be taken positively by the market, reducing the risk of a significant tit-for-tat escalation in the conflict."

The FTSE 100 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.

The biggest drag on the FTSE on Tuesday was tobacco firm BAT, which fell 1.9 percent after Morgan Stanley started covering the stock with an equal-weight rating. Its rival Imperial Brands also fell 1.8 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.

Serviced offices provider IWG fell 6.6 percent after Credit Suisse analysts downgraded the stock to "underperform" from "neutral", citing risks to earnings from the implementation of new accounting standards and the departure of the CFO.

Broadcaster ITV dropped 3 percent after its CEO declined to say whether it had bid for Netherlands-based production company Endemol Shine.

Ocado rose 0.6 percent after the online supermarket said retail sales growth slowed a touch in the 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, Anglo American, and Antofagasta trading up between 1.8 and 2.8 percent. Fresnillo was up 1 percent, supported by an RBC double upgrade to "top pick".

Among mid-caps, Jardine Lloyd Thompson soared 30.7 percent after U.S. financial services group Marsh & McLennan Companies agreed to buy the UK broker for about 4.3 billion pounds.

"JLT has been fiercely independent in the past and so we are surprised to see a recommended bid from Marsh & McLennan and uncertain about JLT's motivations behind the headlines," wrote KBW analyst William Hawkins.

"But our knee-jerk response is that this is a good deal for JLT shareholders with the key governance parties already behind it and so closure is highly likely at the 19.15 pounds price."

Bank of America Merrill Lynch's September fund manager survey showed global investors growing more optimistic on UK stocks, while they cut exposure to euro zone stocks further.

(Reporting by Danilo Masoni; Editing by Robin Pomeroy)

By Danilo Masoni and Helen Reid