UPDATE 2-UK shares drop the most in 7 months on inflation woes; THG shines

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* Softbank leads $1 bln investment in Britain's THG, shares surge

* NatWest slips as Britain lowers stake with $1.5 bln share sale

* FTSE 100 down 2.6%, FTSE 250 off 2.3%

(Updates with market close)

By Shivani Kumaresan and Devik Jain

May 11 (Reuters) - British stocks clocked their worst day since late October on Tuesday after a sudden drop in big U.S. tech stocks over inflation concerns, while shares of THG Plc eyed their best day on record on raising more than $1 billion in new equity.

The blue-chip index .FTSE slid 2.6%, dragged down by heavyweight banks .FTNMX301010 , life insurers .FTNMX303010 and miners .FTNMX551020 .

All the FTSE 100 constituents were trading in negative territory.

The domestically focused mid-cap FTSE 250 index .FTMC tripped 2.3%.

Travel and leisure .FTNMX405010 stocks slipped 4.0%, with British Airways owner IAG ICAG.L falling the most, after it launched an 800 million euro ($971.52 million) convertible bond due in 2028 to strengthen its balance sheet. tech stocks took a beating as investors braced for U.S. inflation data due on Wednesday, while keeping a close eye on a host of Federal Reserve speakers this week to assess how authorities are likely to respond to receding risks posed by the coronavirus pandemic in some major economies. MKTS/GLOB

"With China and the U.S., the world's two largest economies, showing signs of rising inflationary pressures, investors are getting nervous," said Sophie Griffiths, Market Analyst, UK & EMEA, at ONANDA.

"The overriding fear is that pandemic stimulus combined with reopening economies will spark a sharp drive high in inflation, forcing central banks to take action, tightening policy and potentially slowing down economic recovery."

The FTSE 100 has gained about 7.2% year-to-date on optimism that speedy COVID-19 vaccinations and constant policy support from the government would drive a stronger economic recovery.

Beauty and lifestyle e-commerce company THG THG.L surged 11.7% after it raised more than $1 billion in new equity, including $730 million from Japan's Softbank Group 9984.T . NWG.L slid 3.5% after the UK government completed a 1.1 billion pound ($1.55 billion) share sale at a discounted price.