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* FTSE 100 down 0.4 pct; midcaps up
* Guidance cut hammers WPP
* But Lloyds gains after update
* Competition warning hits Hastings
MILAN, Oct 25 (Reuters) - A heavy fall in publisher WPP and gains in the pound kept the FTSE 100 lagging behind its euro zone peers on Thursday as stocks in Europe attempted to rebound following a turbulent start of the month.
The UK's top share index was down 0.4 percent at 6,939 points by 0851 GMT, also weighed by a bounce in the pound, while the more domestically focused mid-cap index joined the broader bounce, rising 0.1 percent.
"That the pound has risen following yesterday's meeting between Theresa May and the 1922 Committee, one that reportedly saw the PM escape with her leadership intact, contributed to the FTSEs decline," said Connor Campbell of Spreadex.
The FTSE 100, which is down 10 percent this year, derives 70 percent of its profits from overseas and strength in the pound is generally a headwind for its export oriented companies.
WPP lost as much as 23 percent at one point after a major downturn at its creative agencies in New York and London forced it to cut its sales and profit forecasts, ramping up the pressure on new boss Mark Read.
"What has been interesting is that WPP's results come after its peers Omnicom, Interpublic and Publicis all published Q3 updates that were well received," Liberum analyst Ian Whittaker wrote in a note.
"North America looks to be the main culprit ... but what is more concerning is that the language suggests significant client losses in Media, which is the highest margin business, in both the UK and North America," he added.
Its shares later pared some losses to trade down 16 percent, leading the fallers on the FTSE.
Drugmakers were heavy fallers, too, with AstraZeneca and Shire both down more than 3 percent, making the healthcare sector the biggest drag on the FTSE.
BT Group was another weak spot.
Its shares fell 2.3 percent after appointing Worldpay co-CEO Philip Jansen as its new COE executive, ending months of speculation about who would be chosen to tackle a host of problems at Britain's biggest phone group.
Their losses were however partly offset by gains among mining stocks and financials.
Lloyds Bank rose 1 percent, tracking strength across the European banking sector, after the British lender posited a higher-than-expected profit for the third quarter.
"Decent performance from Lloyds but the risks remain from its exposure to the UK market, both unsecured and mortgage lending," said Neil Wilson, analyst for Markets.com.
The bank shrugged off fears of a no-deal Brexit and pledged to keep pumping credit into the economy regardless of the outcome of negotiations between Brussels and London.
Shares in British American Tobacco gained 1.5 percent. The stock has proved resilient to the sell-off seen this month as investors see the stock as attractively valued.
Among midcaps, Hastings Group fell 10 percent after the insurer was warned of continuing competition, even though gross written premiums for the first nine months rose as cost of motor insurance policies grew in Britain. (Reporting by Danilo Masoni Editing by Richard Balmforth)